Officials Seek To Cleanse Mortgage Market Fraudby Tim Manni
On both the consumer and corporate sides of the coin, fraud has truly begun to stain the mortgage market. However, federal investigations and new regulations, measures are underway to bolster a bedrock of our economy to return it to the productive and structured state in which it once operated.
The Federal Bureau of Investigation announced yesterday they have begun investigating four past giants of the mortgage market for their possible role in the collapse of the industry. Fannie Mae, Freddie Mac, AIG, and Lehman Brothers have been added to the list of 26 corporate lenders currently under federal investigation. The FBI’s investigation comes on the heels of the government’s proposed $700 billion bailout. According to federal officials, the investigation will focus on “financial institutions and the individuals that ran them.”
Separately, the Federal Housing Administration has begun warning their lenders not to participate in a lending practice Fannie Mae did away with back in August — a dishonest practice know as “buy-and-bail” committed by the borrower, not the lender.
“Buy-and-bail” is a deceitful borrowing practice committed by homeowners who can afford their monthly payments that convinces a lender to write them a loan for a second home, because their first property has lost significant value in today’s marketplace. The borrower explains that the loan for their second home will be repaid by supposedly collecting rent on their first home. When the loan for the second residence goes through, homeowners explain how their “renters” withdrew on the property, and the homeowners simply stop making payments on the first house. Simply, it’s a voluntary foreclosure.
Investigations and new regulations like these should hopefully add balance back to the mortgage lending industry.