February 22, 2008

It is now official - the United States is no longer a nation of laws - "FBI Will Not Go After Borrowers Who Lied on Mortgage Applications"

When I read reports like these, I feel sorry for America. A country founded on the rule of law. A once-proud country of order and fairness.

No more.

This sends a terrible message, that crimes will not be prosecuted, that laws will be ignored, that crime pays, and that playing by the rules is the wrong thing to do.

George Bush, the Justice Department, the FBI, the IRS and the 50 state attorneys general should be ashamed. This is un-American, and those involved in allowing this illegal behavior to go unpunished should be investigated by Congress, and tried for treason. But that would involve Conress not being corrupt and un-American themselves.

Hat-tip to ml-implode for the link

FBI Will Not Go After Borrowers Who Lied on Mortgage Applications

Borrowers who defrauded lenders by lying on their mortgage application could be thrown in prison for up to 30 years and forced to pay a $1 million fine under the current federal law. But the FBI says there is no intention to pursue borrowers at this time.

Almost 60 percent of stated-loan applicants inflated their incomes by at least 50 percent, according to the Mortgage Asset Research Institute. The worst part is that everyone knew the income was being inflated. The industry even had a name for these kinds of loans--'liar's loans.'

Although lying on a mortgage application is a federal crime, borrowers who committed mortgage fraud are low on the FBI's list of priorities. Joseph Schadler, an FBI spokesman, said investigators will be focusing on organized property flipping rings and bogus foreclosure rescue schemes instead of lying buyers.


Anonymous said...

So let's all join the crooks and begin defrauding this Third World Country, since the FBI doesn't give a damn about multibillion dollar scams anymore. It's a free for all and he Soprano family ain't got sh!t on us!

Anonymous said...

Hey IRS, it's now up to you to stick to those fraudsters, since the FBI doesn't wanna do it. But stick good to them; make them pay for the next 20 years and scrutinize all their fillings, especially from REIC people.

Peahippo said...

The License to Steal has been officially issued by the US government. I'm shocked, but I'm not awed.

Afterthought said...

This is the best blog on the internet; maybe it's a generational thing, I don't know.

We haven't been a nation of laws since at least November 22, 1963.

People are ignorant and immoral; it isn't a coincidence. The Church says give me a three year old and I'll give you a believer; we give our children to the television.

barney bubble said...

Buyer Beware - Seller Beware
All involved knew the game. The only thing that matters is keeping hillary, mccain, etc from sticking us with the bill.
Let the collapse come quickly.

Anonymous said...

Is this really all bad? Won't lenders now have to become more vigilant in how they loan since they have no protection from the law? Increasing lensding standards and forcing prices down further? What will the law of unintended consequences bring?

Anonymous said...

Why did President Bush keep telling MILLIONS of Americans to go out and buy a house in 2005/2006 when the market was crashing??

Anonymous said...

20 million illegal aliens have been above the law for years.

JAFO said...

Its a simple matter of logistics. There are not enough agents, prosecutors or jail space to take on the massive number of suspects committing mortgage fraud.


Anonymous said...

anon 1:40 PM:

good point. this further reduces credit and accelerates price losses because lenders can't rely on liar loans nor the once appreciating assets to back them.

on another note, I wonder what generation reads HP the most?

Anonymous said...

can anybody tell me what's "organized property flipping rings" ??.

Anonymous said...

We need the lairs for the next bubble.

Ed said...

The government won't go after 15 million illegal aliens who are breaking the law every second of the day.

Why does it surprise you they won't go after the millions of mortgage fraudsters?

Anonymous said...

Somewhere, Casey Serin is having a good day!

Anonymous said...

I feel like such a fool. I could have stolen a half a million dollars with impunity.

Anonymous said...

Dont steal from your fellow man, the government doesnt like competition.

Anonymous said...

If it wasn't so grossly unbelievable, we should have seen it coming!

Prosecutions = upset people in an election year. Lots of 'em!

Prosecutions = no money collected. If they had any, the probably would have paid for the house. No money, no motive.

Prosecutions = cost to investigate, try, convict & jail & house them. From one house they don't pay for to another, while further draining the coffers.

Prosecutions = bleeding heart media stories. Probably even someone's dear sweet Grandma going to jail.

Prosecutions = lots of people calling their representatives complaing about the big, bad FBI.
That leads to people wanting to be re-elected stripping power & funds from the FBI in the future, and forcing them to "be nice."
Hinders the number one goal of any bureaucracy, which is: preservation and perpetual expansion of the bureaucracy.

Prosecutions = the right, honest, true thing to do, and in our new morality model, we simply can't tolerate that sort of thing!

Makes sense in a twisted, sick, wicked way in the worldly system.

Come to God, read the Book, and do the Word.
It's better over here, and there's plenty of room for you, when you get tired of the worldly way!

Anonymous said...

and on top of that B of A wants a bailout? WTF?

Anyone see that NY Times article. That one woman now has no money to travel or buy new clothes. And that other couple may have to dip into their 100K in savings to make up the loss on their house. BOO FUCKING HOO.

I think the time for going Belgrade may be drawing near.

Anonymous said...

There are no big headlines for going after J6P for lying on a mortgage application, so the FBI won't do anything about it. They only go after cases if they can get their faces on TV or names in the newspapers.

Anonymous said...

We can't tie up the nation's courts with people who commit fraud on the order of hundreds of thousands of dollars.

We need those dockets free to try the illegal downloaders of music, by golly.

Anonymous said...

Rob a bank for $5,000 and get 20 years in prison after they send 10 FBI agents after you. Defraud a bank for $500,000 and the keystone cops won't even bother to investigate.

Anonymous said...

We need to apply the same principle to lots of things - drugs, computer file-sharing, driving while
cell-phoning, make-a-list/wish...
If enough people do it, it cannot stay illegal because they don't have enough enforcers and prisons, and eventually some form of financial sanity will have to take precedence...

just somone said...

Yes, any income statements should be sent to the IRS.

And perhaps the FBI does not want to expose that the banks, and the feds actually knew what was going on.

consultant said...

Another example of the BushCo trend of turning this country into a South American style country.

Look for Canada to start building a wall along our northern border.

Douglas said...

A lot of the people who committed this kind of mortgage fraud will end up losing their house and deeply upside down in their mortgage so I don't feel too bad about the FBI not going after them. They'll get what's coming to them. What do u achieve by prosecuting them? More wasted tax payer money... no thanks. On top of that, the banks don't deserve compensation because they were "lied to". They knew damn well that they were being lied to and they didn't care. I'm all for capitalism and free markets, but unfortunately this whole mess shows that capitalism w/o regulation can go haywire.

Anonymous said...

The majority of HP readers think it is not immoral to walk away from a mortgage, and a lot of visitors took the stand that because corporations lie and are out to screw us, screw them.

What is the difference between that position and the position that lying on a loan application in an attempt to make money is corrupt and should be punished?

Anonymous said...


Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans.

The bank warned that tightening credit conditions were leading to “escalating levels of delinquency and default among borrowers” and “an unprecedented number” of homes that would enter foreclosure.

Administration officials have given the Bank of America plan a cold reception. But the idea is similar to one proposed by Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee.

The Federal Housing Administration, meanwhile, is examining ways to expand its new insurance program, known as FHA Secure, to help people replace their costly subprime mortgages with federally guaranteed fixed-rate mortgages.

Mortgage industry executives have complained that the F.H.A.’s eligibility requirements are so restrictive that the new program has helped only a trickle.

Credit Suisse executives said they have held lengthy meetings with F.H.A. officials and have urged the agency to relax rules that currently disqualify many borrowers.

One idea, company officials said, was to allow borrowers who had simply made six payments during the course of their mortgage to qualify.

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, has ordered his staff to come up with options for a broader rescue bill. An aide to Mr. Frank said his bill would, among other things, allow the government to buy up at least some troubled mortgages.

Anonymous said...

I agree with Douglas above. Also, don't forget this would become a he said-she said game with borrowers pointing the finger at the broker claiming they didn't put that income on the ap. All parties are guilty in this mess: borrowers, brokers, lenders, appraisers, etc... The banks are taking losses, the brokers are out of work and the borrowers are out of a home. So tell me again why we should bailout anyone? Even if the borrower was "misled," they had zero skin in the game so they essentailly are being evicted from a "rental." As usual, the bailout is for the banks. Realize that before you pull the lever for Hillary.

Anonymous said...

guys and gals I really don't know what you think is happening. The truth is the business at Countrywide is still heavy, backed by BofA. They are still writing loans as bad as they come. The junk has not stopped. Loans are being given to liars as we speak. Also, BofA just offered 2.9% transfer credit till 2009.
Someone I know moved $35 K to them because of the rate. Now, no doubt on the books they will show a gain of 35K to make everything look good even though it is a liability.

Anonymous said...

Not realistic to go after millions of ordinary folk. Get the big fish who enabled the fraud. The problem is, how do you arrest and prosecute all of Wall Street?

Anonymous said...

Heck, USA has no longer been a nation of laws for a while.

The INS hasn't tried to enforce immigration laws for real for years now.

Like Robert Wagner said in Austin Powers, "There are no more countries, just corporations."

Anonymous said...


And you still think Mozillo will be indicted?

Anonymous said...

>> Rob a bank for $5,000 and get 20 years in prison after they send 10 FBI agents after you. Defraud a bank for $500,000 and the keystone cops won't even bother to investigate.

Funny - one needs a gun to get the $5k, but only a pen to get the $500k...

Anonymous said...

Why the US flag?

How about the arrogant, criminal and greedy US borrower?

They are THE ones that lied! And unfortunately, there is not that much man-power to round them up.

Now you wait and see if that will happen in Europe.

Anonymous said...

"but unfortunately this whole mess shows that capitalism w/o regulation can go haywire.

Yeah because every economics textbook defines capitalism as "the system with no rules..."


Vectorz said...

Douglas , not sure if you have any idea what 'losing their house' and having a foreclosure does to you in consequence but I'll tell you...

Losing their house means living like *US* (renting). Oooh the travesty.

Having foreclosure ding on your credit means can't buy house for 2 years but thereafter no problem. Hardly a worthy consequence that will discourage from happening again.


We The PeepHole said...

Enlightening Blog...thanks for a great education.

Re the FBI not going after the no-doc liars, should they go to jail?

No-doc or stated income policy is essentially inviting people to lie, right? How hard is it to get paystubs and acct information?

Anonymous said...

"I'm all for capitalism and free markets, but unfortunately this whole mess shows that capitalism w/o regulation can go haywire."

If there were no Fannie, Freddie, etc., etc., this would never have happened (i.e., if there were no potential for a bailout). That would be the ideal situation, free markets that understand there is no chance for a bailout.

Frank@Scottsdale-Sucks.com said...

"make them pay for the next 20 years and scrutinize all their fillings, especially from REIC people."

I'm willing to bet that more than half of REIC people neither filed nor paid taxes for the last 5 years. They're paid 1099 without withholding and I'm sure they spent every last dollar on the BMW, boat, and house payments - and lots of booze and partying - without ever paying taxes.

It takes about six years of non-filing before the IRS swoops in and picks your a** up so a storm's coming to these REIC charlatans.

Anonymous said...

We are no longer a nation of laws - we have evolved into a nation of lies.

Legalized crime has become the norm.

Our nation's so-called 'leaders' are merely shills for a rigged game contrived by the financial fraudsters of Wall Street.

Tortured logic is now mainstream gospel parroted by a sell-out MSM.

The bigger the lie - the bigger the payoff...

"Facts do not cease to exist because they are ignored". Aldous Huxley

Anonymous said...

I just met someone who said his friend bought a 1.2 million dollar home. Broker said "How much can you afford" The guy says "2000 per month" the broker said "Fine thats 300k so we will put the rest on a balloon payment on the back end." This is how these prices got where they are. Banks can't foreclose one guy has been sitting in a million dollar home in Flordia not making payments since 2002. WAMU tried to forclose and he said "Show me the note Jack" They couldn't and several more attempts have fail. They don't know who owns these loans. That is why Bernanke and Paulson look scared, the shit is gonna hit the FAN>

Veronica Lodge said...

RE: This sends a terrible message, that crimes will not be prosecuted, that laws will be ignored, that crime pays, and that playing by the rules is the wrong thing to do.

Prosecution of these cases would be difficult and time-consuming. Besides, the government is after money and putting taxpayers in prison just isn't profitable.

The money governments cannot get from increased taxation, they will get from increased fines and fees.

Look for more rigorous enforcement of parking tickets, traffic violations as well as bigger permit and license fees.

Other increased government income will be derived from fines for various violations of health and safety laws.


Anonymous said...

Keith....you gotta let this go.
The FBI isnt going to send millions of TAXPAYERS to jail.

Just think of the mortgage related deductions all the liar's took on thier 07 tax returns.

Uncle Sam isnt that stupid guys.
Homedebtors will now pay much more in taxes. So no jail time for them, keep them working...and paying.

Homedebtors just changed hamster wheels, thats all.

Anonymous said...

It is now official - the United States is no longer a nation of laws - "FBI Will Not Go After Borrowers Who Lied on Mortgage Applications"

Um, the US stopped being law and order when they recognized the illegal secession of Kosovo, in violation of UN and international law.

Anonymous said...

That is not surprising. It's simply a question of logistics. With probably several million people who lied on their loan applications, it's not feasible for the FBI to crack down on that many offenders.

I think a few of the more eggregious and well known ones will likely be on the FBI's radar (hint: Casey Serin, Greg Swann). But beyond that, they have bigger fish to fry.

Anonymous said...

By John Poirier and Patrick Rucker

WASHINGTON, Feb 22 (Reuters) - The Democratic-led U.S. Senate plans to begin debate next week on a home mortgage foreclosure-prevention bill that would let bankruptcy judges erase debt and that would provide billions of dollars to rehabilitate abandoned properties.

Democrats drafted the measure, which could come up on the Senate floor as early as Tuesday, amid mounting election-year concerns about a surge in home foreclosures that has rocked financial markets around the globe and put the U.S. economy at risk of recession.

In preparation for debate, Democratic leaders have reached out to their Republican counterparts to try to agree on possible amendments and avert potential procedural roadblocks, Democratic aides said on Friday.

The "Foreclosure Prevention Act of 2008" is sponsored by Senate Democratic leader Harry Reid of Nevada and is multilayered legislation that includes elements likely to draw bipartisan support and others that will spark Republican ire.

upthecreek said...

Moral of the story - it's ok to steal (lie) a little. This is similar to white collar crime - low prosecution rate.

Stay below the radar, or steal when everyone else is stealing and you flood the system with low level crime. No way they can go after everyone.

Anonymous said...

Hey Keith,
Isn't it time for a post about how cheap the stock market is and how AAPL is a screaming buy at $135, um 130, um 125, um 120....

Anonymous said...

Anonymous said...

Rob a bank for $5,000 and get 20 years in prison after they send 10 FBI agents after you. Defraud a bank for $500,000 and the keystone cops won't even bother to investigate.

February 22, 2008 3:58 PM

Maybe what the bank robbers need to do is bet it all on the state lottery. That way, if they lose, the state makes money and feels sorry for them about their losses.

joe frm chi said...

I'm confused, Keith. Are you upset that liars won't get into trouble? It seems like you are. But then you are supporting Obama. Obama is not going to dish out come-uppings! Obama will tax us to bail out the cheaters and dumb. You can't have it both ways, Keith.

Anonymous said...

"Fraud for property is less impactful on the economy than the speculative fraud where people are trying to flip homes for profit."


Our ENTIRE economy of the last six years was built upon fraud for property. Home prices would not have run up so high if there were actually some sort of safeguards to keep people who did not belong in the market out.

Webmaster said...

hmm, does it even matter any more? We need solutions. Proactive solutions and common sense... I'd like to get your opinion on my view of the "fix"... posted on my blog, (link above) I agree that lying is a problem, I'm just concerned that if we spend money going after the liars (who don't have money now anyways) that we'd be in an even bigger financial mess...

Anonymous said...

I feel like such a fool. I could have stolen a half a million dollars with impunity.


I could have squirreled away a ton just by lying on some paper. A paid off house, and 4 foreclosures. BFD. Oooooh damaged credit. I am sooooo scared.

Pavlov's House said...

I wonder if the IRS is going to stop going after people that don't pay their taxes. That is the next step people. I am not talking about people conciously objecting to the non-prosection of laws. I am talking about the people that are going to be unable to actually pay their tax bill. They are going to stop withholding and/or won't pay up when the bill comes due. It's going to be in the millions. Is the Gvmt going to waive their responsibilty to not pay their taxes, while others still have to? What about those that stop paying their real estate taxes, not out of protest but inability. There the logical next step. What are the people that are able to pay going to do? Still pay while there neighbors get a free ride? Strong reciprocity!! Either you have a republic of laws or you don't. Its really that easy. Its called moral hazard. Once its out of the bag, there's no putting it back.

Folks, please wake up!!! call your f'ing congressman and Senators, please, I did. Tell them you will not stand for letting criminals go free, while free people have to pay for their crimes. Taxation without representation, now that has a ring to it!

The speed and ferocity of this conflagration is both mesmorizing and intoxicating.

The Battle of Sprawlingrad is raging!!!

Douglas said...

Vectorz, I agree foreclosure isn't the worst punishment for people that lied on loan docs, but realistically what do you want to happen to them? As many people stated, prosecuting all of them isn't possible nor beneficial to anyone. Losing their house might even be a good thing for them since it will get them out of a declining asset. There are other non quantitative negatives associated with losing a house; ie the embarrassment, having to relocate your family, etc. Granted these aren't the end of the world, but I don't think many people would like the idea of losing a home. Also, unless laws are changed, people will owe taxes on the amount of money forgiven by the bank (the difference between the loan amount and the sale price of the house). I don't see what else can be done to these people w/o costing me (the tax payer) more money and I'm certainly not interested in having my money wasted on them.

Anonymous 6:26 PM,
Ya Fannie and Freddie were a big enabler of this mess. And stupid new policies such as allowing them to fund jumbo loans now definitely isn't helping anything. But also the securitization and sale of these loans to investors enabled this mess. It put too much space between the people that were supposed to validate borrowers' credentials (brokers) and the people that actually took on the risk for these loans (investors). I'm not sure how you would solve this problem aside from apply regulations that pinned responsibility onto the brokers so that they have something to lose if sh*t hits the fan. Eventually in a free market things would reach an equilibrium (ie how the credit market has now tightened considerably), but the market was to slow to react thus allowing this bubble.

Andrew Hac said...

The Americano is as toasted as a snapper turtle skewered on a stick from head to ass all sizzling, juices dripping, fat popping over a bed of white hot charcoal grill.

Americano = Grilled Snapper Turtle

Heeeee... Haaaaa... Arrrrr...

The mentality of the average Americano is just amazing, if not stupefying.

A Circuit City Sale Associate is able to buy a house.
A Shoe Sale Man is driving an Audi.
An uneducated, illiterate, ignorant Ford factory auto-assembly worker makes $40/hour.
The Iraqi has Weapon Of Mass Destruction.

Talk about brain-dead zombie, blind-as-a-bat crapper. Maybe that is the reason why there is such word as "Trailer White Trash"...

DaveO said...

on another note, I wonder what generation reads HP the most?

I'm 31 myself. I'm not sure what generation that makes me. Keith, perhaps you should have a poll (with choices like <20, 20-25, 26-30, 31-40, 41-50, etc.) of HP reader's ages.

Anonymous said...

we haven't had the rule of law in this country since 1865. this country has been under military emergency since the war of northern aggression.

Anonymous said...

Pretty Unbelievable - Austin Realtor w/ a BIG Rap Sheet
Date February 21, 2008

I saw this on a thread at REW and was pretty amazed/shocked. A local Austin real estate agent, Mohammed “Mike” Gharbi just had his license renewed by TREC (last month) with the following record:

*Arrested by the FBI
*Convicted of 5 counts in a $15m loan fraud scheme
*Sentenced to one year in prison
*Ordered to pay $84,914 restitution

He was convicted of purchasing cheap houses, getting fraudulent appraisals to justify loan amounts much higher, and then selling the houses to co-conspirators at much higher prices.

Apparently, he is in the process of appealing his case, and has 2 more months to appeal his case to the Supreme Court. TREC claims that they can’t yank his license until/unless he loses his final appeal.

Lost Cause said...

Almost eight years of watching the man at the top and his little monkey get away with murder, and just now you are catching on?

nanny state said...

Coming soon to a bank account near you Capital Controls. The G7 central banks finalized the plans and will implement them to prevent "irrational price moves".

The biggest, the money center banks, cannot fail because the authorities do not have the resources to close them and work with millions of depositors. So they are simply going to hold up their middle finger to the bag holders and offer some kind of IOUs in lieu of actual payments. You will need a letter from God to close your account. Wire transfers offshore? Letter from God. ATM withdrawals? Limited to $200 a week.

Own gold ETFs or bullion? Good, when you sell them you will pay a transfer or exise tax that limits your proceeds to some fixed price for the metals. And here is the best part - LOL - the tax will be used to help bail out the banking system!

Up is down, left is right, black is white, we are so f_cked.

Anonymous said...

Yeah, really. Is everyone here blind or stupid? Especially Keith. People lying on their mortgages are the end of law in the US? How about lying about intel to go to war? How about illegally--and boastfully--breaking surveillance laws regarding us US citizens? How about suspending habeus corpus? How about ignoring Congressional subpoenas? How about lying to Congressional committees, over and over and over?

Jesus, wake up, people. The fish rots from the head down. There hasn't been a rule of law in this country for years now. This mortgage crap is penny-ante in legal terms. Cripes.

Newport Coaster said...

"Our ENTIRE economy of the last six years was built upon fraud for property. Home prices would not have run up so high if there were actually some sort of safeguards to keep people who did not belong in the market out." -- Posted by another Anon.

This is exactly what Keith was getting out with this Osama Bin Laden post a few days ago that alot of you ridiculed. This IS exactly how the fed govt funded this country after the 9/11 hit. 'Someone' recognized an opportunity, which kept getting more creative with time -- like the masses buying their SUVs. Their plasmas; their new furniture. Their Las Vegas trips. Bush kept telling us, "Go out and buy!" He'd say: "This is the best thing you can do for America!" How was it going to be funded???? THIS IS HOW OUR ECONOMY KEPT AFLOAT, post 9/11. Look at the time period -- last 6 years. In some ways, whether it was a diabolical 'plan' that was strategized, vetted, etc. by a select few -- or just a series of "what ifs" that the Fed/Greenspan/Treasury began to articulate & give the green light to as events unfolded -- this kept Bush alive for 8 years, and funded both Wall Street & Main Street. It just bought us a little time. Now...time's up & only a handful really get this & its long range ramifications. So, back to the same old question: Should all (most) cash be converted to gold, even now, at $920/oz? And, in what form? Cash & carry coins? Certainly not paper & not in some vault in Geneva, right?

Anonymous said...

"Talk about brain-dead zombie, blind-as-a-bat crapper. Maybe that is the reason why there is such word as "Trailer White Trash"..."

Yeah, Andrew -- and I'll tell you where they live: Aliso Viejo, Orange County, CA. And we're talking, by the masses. The entire town is loaded with them & they're mean, nasty SOB white trash.

Anonymous said...

I hate Baby Boomers. They are the ones who did this what a bunch of spoiled short sighted idiots. O and you are OLD act as you have some decorum.

Burn Baby Burn

Mitesh Damania said...


Anonymous said...

Nation of laws, hahahaha. Wait a minute, was not America the land of the Indian before a bunch of Euro Trash came, stole the land and started writing documents about how they (white men) were equal to the King of England, who must have laughed his ass off when he read it. American law was not written by God and given to Moses. American law is a whore for what the majority desires. Roe V Wade is a perfect example. Concerning the housing bubble, there are not enough jails to uphold the law. So the law will take a backseat to financial considerations.