Certified Forensic Loan Auditors, LLC

 
  Upcoming Classes

Search CFLA's Article Archive:

The Jury in a Mortgage Case Finally Strikes Back at Fraudulent Bankers

latimes.com | September 27, 2014

By Michael Hiltzik

Given the government's failure to bring criminal cases against bankers and other Wall Street figures for collapsing the U.S. economy in 2008, it's been left to the little guy to strike back.

To be precise, one federal jury in Sacramento, which acquitted four allegedly fraudulent mortgage borrowers of criminal charges after hearing testimony that the executives at their banks pulled out all the stops to make fraudulent loans for their personal profit.

We're a bit late to this story--the verdict was handed up at the end of August, Salon's Thomas Frank had a good analysis of the case a few weeks ago. But because of its potential significance for mortgage fraud prosecutions going forward, and because it happened in the federal district known for its aggressiveness in pursuing borrowers for mortgage fraud, the case is worth a closer look.

"The jury understood that these defendants were mice," says William K. Black, a former litigation director at the Federal Home Loan Bank Board who oversaw the prosecutions of numerous savings-and-loan executives after that industry's meltdown.

Black, who is associate professor of law and economics at the University of Missouri-Kansas City, was an expert witness for the defense in the Sacramento case. He may have delivered the key testimony blowing up the government's contention that the defendants were the main fraudsters. His testimony was that executives at the lending institutions deliberately created a system to make fraudulent loans as a recipe for personal enrichment.

The government had charged Yevgeniy Charikov, 42, a Sacramento real estate agent, and three others with buying properties, flipping them at inflated prices, and submitting fraudulent documentation to lenders Aegis Wholesale Corp. (which filed for bankruptcy in 2007) and GreenPoint Mortgage Funding (now part of Capital One) to obtain loans on the properties.

Black testified that the very business model of Aegis and GreenPoint depended on their making fraudulent loans--their executives were determined to make the companies grow fast, to collect lavish compensation, and sell off the problem loans in the secondary market so they would be someone else's problem when they blew up. Companies like like GreenPoint and Aegis couldn't grow fast and book huge profits by serving the market of good borrowers with mortgages commensurate with their ability to pay--that market was too small and too competitive. So they chose to make loans that didn't require verifying the borrowers' incomes.

In the Sacramento case, the jury essentially found that the truth or falsity of the documentation the borrowers provided was immaterial--the lenders would have made the loans anyway.

During the mortgage boom, the incidence of fraud in "stated income" loans, in which the borrowers were taken at their word, was 90%, Black testified. It was well known in the banking industry, he added, that stated income loans were "an open invitation to fraudsters."

Black explained to the jury that making such loans requires gutting the underwriting and appraisal departments, an honest bank's bulwark against bad mortgages. Asked about the "quality" of the underwriting at GreenPoint, he replied: "Using the word 'quality' is an injustice to the word. This was an utter sham in which underwriters were instructed not to underwrite." He pointed out that former underwriters at GreenPoint testified that "even if they called the (borrower's) employer, had them on the phone, they were not permitted to ask about the (borrower's) income.

"That's insane," Black said. "No honest banker would ever do that. No real underwriter would ever go along with it either....Only fraudulent lenders would ever do stated income. Period. Full stop."

Where would the directives to underwriters come from? From the executive suite, of course. "The fraudster," Black testified, "is the CEO or whoever controls the institution and decides, 'We're going to do loans that will be 90% fraudulent, and then we're going to sell them to Bear Stearns through fraudulent representations and warranties.'...Nobody gets to do anything unless the CEO says, 'Hey, let's create a system that produces almost unanimous fraud.'"

That's a key point, because the pattern of government enforcement post-recession has been to pursue corporations while leaving their actual managers alone. In the Department of Justice's "historic" (DOJ's word) $16.5-billion settlement with Bank of America this summer or its "historic" (again, prosecutors' word) $13-billion settlement with JPMorgan last fall, how many executives were made to lose their jobs or face criminal prosecution or even civil lawsuits as a condition of the deal? Not a one.

The notion that bank managements are the victims of mortgage fraud is deeply ingrained in the prosecutor mentality. In 2010, Benjamin Wagner, Sacramento's U.S. attorney, told the Huffington Post, "It doesn't make any sense to me that they (bank executives) would be deliberately defrauding themselves."

Wagner plainly doesn't recognize that a corporation and its top executives are not the same thing, or that a CEO might defraud not himself, but his bank. "Despite what the Supreme Court says," Black told the jury in Sacramento, "corporations aren't really people. The reality is corporations have no soul, they have no mind...they have no ability to protect themselves from their senior officers."

Wagner's office prosecuted and lost the Sacramento case. In its aftermath he told the Sacramento Bee, "We respect the criminal trial process, and accept the jury’s verdict in this case. It will not dissuade us from pressing forward in the many other mortgage fraud cases currently pending in this courthouse."

For the most part, they're are cases against those Black defines as "mice." The approach leaves the King Rats untouched. At least this once, a jury called foul. Wagner might be wise to recalibrate his guns.

As Black told us, "I certainly didn't go out to 'dissuade' the prosecution of mortgage fraud, but to encourage it."

 

Back to September 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer
Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:




 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.

 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2007-2016 Certified Forensic Loan Auditors ™ All rights reserved