Burning Down the House: Mortgage Fraud and the Destruction of Residential Neighborhoods

According to Criminal-Law-Lawyer-Source.com “Fraud is the act of deliberately deceiving another individual or group in order to secure an unfair or unlawful personal gain at the expense of that party.” Fraud may be either civil or criminal offenses and many times

These types of criminal offenses are unlawful, but look upon as non-violent offenses. These Ponzi types schemes have been in existence for years, but was not well known until the late 1990’s with the fall of JP Morgan and Bennie Madoff.

Mortgage fraud is one of the costliest, yet seldom prosecuted crimes in the criminal world. CoreLogic estimates approximately $13 billion in fraud losses occurred in 2012, according to the latest available data in the 2012 Mortgage Fraud Trends Report (Gerding, 2013). While these numbers may seem high, the approximate $13 billion in losses is only a fraction of what it would be if every case were to be prosecuted. Mortgage fraud was also a major contributing factor towards a national, and nearly global economic collapse in 2008 when the United States economy saw the worst recession it has seen since the great depression. Anyone that has seen the films “99 homes” starring Andrew Garfield and Michael Shannon or “The Big Short” starring Christian Bale and Ryan Gosling has seen a largely realistic glimpse of mortgage fraud and how devastating it can be.

The real estate industry is thriving with approximately sixty-eight percent of all Americans being homeowners. With low interest rates, 1st time home buyer down payment assistance programs, and government funded educational opportunities (i.e. the Home Ownership Center of Greater Cincinnati), the real estate and mortgage lending industries will continue to flourish. However, there are some unethical lending practices that are threatening the housing industry as a whole.

The mortgage crisis we are experiencing in the United States today is already ranking as among the most serious economic events since the Great Depression of the 1930’s. Hardly a day goes by without a story in the newspaper or on the cable news stations reporting about the increase in the number of foreclosures across the United States. The effects of this crisis have spread across all financial markets, where in the end all of us are paying a price for this home mortgage crisis. When the housing market collapsed, so did the availability of credit which our economy depends upon. The home mortgage crisis, the financial crisis and overall economic crisis all need to address by the

Michael Hudson tells the stories of victims with many compelling storied who were tricked into signing up for risky high-cost loans, as well as the greedy lenders who scarified the lives of their victims to gain as much money and power as they could. Hudson begins his story with an explanation of deregulation and the resulting emergence of subprime mortgage lending firms in California. Roland Arnall was a pioneer of the S&L industry, and Hudson traces how Arnall’s lending operations grew into the nation’s biggest subprime lending empire, Ameriquest.

As the economy drops and foreclosures are on the rise, millions of Americans who were financially stable several years ago are asking the same question, “How could this happen to me?” The crisis has occupied the minds of politicians, who are trying desperately to solve this problem, but the tragedy continues as more and more Americans are foreclosed on with no alternatives. The foreclosure crisis will not be solved by simply lowering interest rates, firing loan brokers, or other short-term, ineffective solutions. The long term solution to the housing crisis has nothing to do with housing. The government has lost its way and needs to redirect the way the whole economy is run.

The foreclosure crisis in Cleveland has imposed significant financial burdens upon taxpayers and area residents who have been forced to shoulder burdens that are rightfully the responsibility of borrowers, mortgage lenders and others that are direct parties to the mortgage transaction. Indeed, “the failure of borrowers and lenders

The 2008 housing market meltdown in America created a ripple effect that had a negative impact on multiple real estate and stock markets throughout the world. Also, many people who were investors in the America market have never recovered from this financial disaster. So, one must contemplate how this event could have transpired in a country with such a strong economy with governmental regulations designed to protect the average investor. Nevertheless, it is simple, it took brokers, real estate appraisers, realtors, Wall Street, and mortgage companies combined unethical behavior to allow greed to be his or her guidance in pursuing wealth form unsuspecting new home purchasers who could afford his and her recent purchase, a new house.

to take advantage of these people by granting mortgages to them at terms that are

This paper will demonstrate the application of criminal statutes to white-collar crime, corporate fraud and governmental crime. This paper will discuss two sophisticated crimes in further detail. This paper will explain and assess common methods or avenues of committing white-collar crime, corporate fraud, public corruption, or governmental crime. This paper will analyze the application of state and federal statutory requirements and case law. This paper will provide examples of criminal incidents and the outcomes of the court cases.

“The best candidates for predatory lending have been found in the poorest areas of the country” (Keren, 67.) Individuals in these distressed urban communities, signed predatory housing loan agreements based on various circumstances. Housing loans were sold through market negotiations and were based on securing the consent of the borrower (Keren, 68.) Lenders persuaded borrowers from these neighborhoods that had once been denied mortgage loans, to borrow more than they were ever able to repay. Keren gives an example of an immigrant who was pressured to take a loan that he was unable to repay, he was reassured that he’d be able to pay back the loan through the income from his tenants, which the lenders offered to help him obtain. The borrower was overwhelmed with stressed, suffered from a heart-attack, ultimately, he became unemployed and his property was foreclosed (Keren, 68.)

The mortgage crisis and attendant real estate collapse of the late 2000’s was disastrous for numerous homebuyers and ushered in a time of economic hardship for many in the United States. This crisis laid bare problematic industry practices, some predatory and others merely short-sighted, as well as buyer behaviors that were both financially unviable and psychologically damaging. In spite of the havoc wreaked by the real estate collapse, we can learn valuable lessons by examining the buyer behaviors and presumptions of that time and adapting our current attitudes and behaviors accordingly. Improved consumer behaviors are not the only positive results of the real estate collapse. Meaningful regulatory changes, designed to protect buyers, have been effected within the lending industry as a direct result of the crisis and its fallout. The lessons we learned and the changes to lending practice combine to potentially serve as a great benefit to real estate consumers in today’s market, both those new to the housing market as well as those “boomerang buyers” who are returning to the market after having experienced the mortgage crisis firsthand.

With all of the incentives and mortgage products given so easily to people that couldn’t afford the high prices (including interest rates), many people defaulted on their first mortgages because they were no longer were able to receive the profit from the homes they first intended to flip. “During the first quarter of 2008, nearly 9% of all mortgage holders were delinquent or in foreclosure, the highest rate since recordkeeping began in 1979. Foreclosure filings more than

It is not possible to count every possible type of fraud. Someone has developed a new variety since you asked the question. Some are felonies. Some are not. Some are felonies in some places and not in others. Some can be felonies or not be felonies in a single jurisdiction depending on the amount involved. But I will only focus on three of them in this paper.