What We Did Was Criminal – Confessions Of A Former Loan Officer

Bring Criminal Charges Against Chief Executives of Leading Originators And Securitizers of Stated-Income Mortgages

by Michael David White


You can steal and burn money many different ways. Leaders of financial firms use a conservative bias with money they lend to protect society’s most precious asset: Savings accumulated through blood, sweat, tears — sacrifice.

Unless you live in interesting times. What was sacred is profane. We have and do live in interesting times. The basic rules of lending were banned in the credit bubble. Sacrifice was a joke. Money was easy. Now we have the aftermath of the crisis. It is only beginning.

The most notorious method for stealing burning squandering money in our real-estate-and-mortgage bubble was something called stated-income loans. The popular term now is liar loans. What does that mean?

Amherst Mortgage Insight April 13 2010 opinion on stated income

For the person who can’t believe fraud could be committed on a grand scale, who believes the world works according to right and wrong, the truth is stark and simple: Originating banks allowed borrowers to say or to “state” or to lie about their income and no proof was required to back up what was said or “stated” or lied about.

You could lie about your income to take out a new mortgage and the bank never checked to see if what you said was true or false.


The Mortgage Asset Research Institute referred to a study that found 60 percent of applicants who used stated income exaggerated what they earned by more than 50%. They verified this fraud when mortgage application statements about income were checked against IRS records on income reported to the federal government.

Loan officers were the grand facilitators and front-line perpetrators of this fraud. On a refinance, the loan officer simply looked at a particular borrowers credit report, added up the debt payments on credit cards, car loans, and mortgages, and created an income figure which made the debts affordable including the new mortgage. A purchase worked exactly the same way. The income was a derivative of the amount the borrower wanted to spend to buy their new home. Many borrowers were not innocent, but other borrowers were playing on a field where they had no experience. They could easily be lead to believe in the acceptability of this criminal fraud.

There is no question about what these mortgages are. Individuals borrowing money fabricated the amount of their income. The banks required no verification of the statements about income. By that action banks encouraged the fraud. If this failure to verify factual statements is acted out on a grand scale, then the bank is the leader and creator of the fraud. If stated-income mortgages were created by bank policy overseen and approved by top management, then those managers and overseers are the leading criminals in the conspiracy.

With stated-income loans, the banks did not ask for supporting documents like W2 forms and pay checks. They did not verify statements about income against what was reported to the IRS. Yet the first job of a bank in lending is to check the supporting documents.

If you borrow money, you need income to pay it back. The first job of a bank is to check to see if you have income to pay the borrowed money back. If you eliminate the verification of income for a mortgage borrower, you eliminate your ability to predict the likelihood of repayment.

The reason this phenomenon rises to the level of a high crime is that a huge number of these mortgages were originated. Stated-income mortgage fraud was not an isolated crime. It was done countrywide, so to speak. A report from the Mortgage Brokers Association for Responsible Lending said 37% of non-agency (subprime) loans securitized in 2005 required no documentation of statements about income made in the mortgage application.

I worked in the subprime units at Countrywide and Wells Fargo during the bubble years (2004 to 2007). I saw this phenomenon first hand. To pretend that there is anything mysterious or unknown about the methodology of these loans is simply to add a lie on top of a lie on top of a lie.

Following civil charges being filed against Goldman Sachs, what is clear now is that the crime of stated-income mortgages deserves to be explored fully by criminal prosecutors.


The top management of leading originators and securitizers of stated-income mortgages should face criminal charges. While they may say that they didn’t understand the fraud which was committed, there is no question they led these organizations. There is no question complicity within management was required. Loan officers acted recklessly and dishonestly and criminally, as did borrowers, but neither loan officers nor borrowers decide that supporting documents verifying statements about income are unnecessary. That’s a management decision.

All top managers should be called to testify before Congress about their knowledge of the underwriting of stated-income loans. The reporters who cover these companies and their top executives should also ask: “What did you know about stated-income mortgages? When did you know it?”

That we have gone so far in the financial crisis without this basic work being done testifies to the farcical nature and grandiose ineptitude of regulators, prosecutors, politicians, and especially the media. It’s truly a carnival of stupidity. Right and wrong are unknowable because they are too simple to understand.

The biggest names at the biggest commercial banks and investment banks deserve fire, hatred, condemnation. Prosecute the criminal act of encouraging false statements of income on mortgage applications. The factory-like creation of stated-income mortgages lies in a central place of perhaps the most destructive fraud in world history.

‘Tis a consummation devoutly to be wished on no country or people, yet it has been done here and to us. The poison is in our economy. It is suicidal. It is criminal. There is no question.

Read more at newobservations.net


8 Responses to “What We Did Was Criminal – Confessions Of A Former Loan Officer”
  1. Kerry C says:

    So what is someone totally ruined by one of these loans to do? My monthly payment went from $425 to $2200, I ruined my feet trying to work around the clock to pay it and my wife ran off with a landscaper because I had no time for her. I had no money for anything. The kids suffered, the house fell into disrepair, my truck seized for lack of maintenance.Then I lost my house and business. The eviction is November third. I’d like to see heads roll in the banking community along the lines of when Reagan fired all the air traffic controllers for doing America one millionth as much damage.

  2. WAMU Wrecking Crew says:

    (email to Senate Sub-Committee re: WAMU’s Fraudulent (crminal) business practices…..)

    I am sending out copies of this email to others to enlighten them as to the Senate Sub-Committee hearing with Kerry Killinger and Steve Rotella, both formerly of Washington Mutual Bank (WAMU.)

    I have proof that WAMU INTENTIONALLY changed my debt to income ratio to willingly “force” the LPS Desktop underwriting program to “approve” my loan. This would mean three things:

    1- WAMU deliberately and maliciously removed approximately 40% of my debt against my Debt to Income Ratio to over-ride the initial underwriter “decline” to generate a final “approval.”
    2- My loan was based on FULL DOCUMENTATION of TWO YEARS of Tax Returns, Profit and Loss Statements, Balance Sheet and Operating Statements, Corporate returns, Copies of Leases, and checking statements which would have PLAINLY EVIDENCED THE DEBT OF THESE THREE MORTGAGES THAT WERE SIMPLY TOSSED ASIDE.
    3- A consumer who would have performed this same act would be GUILTY of LOAN FRAUD, and due to the evidence and motive, would have been prosecuted and convicted of Loan Fraud.

    In addition, the same final underwriter, cut the property taxes in half (approximately $4700) after PLAINLY ACKNOWLEDGING the taxes at approximately $10,000 in a prior agreed upon settlement statement. Again, this effort was clearly to force the LPS Desk-Top Underwriting Software to force the loan from a “decline” to an “approval.” Again, this would be considered loan fraud if perpetrated by a consumer. Regretfully, the property tax deficiency caused an unrealistic, unforeseen and unmanageable $1400.00 per month SPIKE in my mortgage payment 17 MONTHS AFTER CLOSING. Imagine, if your monthly payment unexpectantly and unfairly went up $1400 per month, would you be very happy?

    I was sent a LOAN APPROVAL LETTER earlier than the initial “decline” indicating that it was a “good enough” loan at the dollar amount that I could shop, prepare to purchase, and close on a house at the commensurate price level of a million dollars. This proves two things about WAMU’s UNCLEAN HANDS and UNFAIR & DECEPTIVE BUSINESS PRACTICES:
    1- They were willing to do anything they wished to approve the loan that WAMU knew would already fail.
    2- That WAMU would approve this loan on the basis of utilizing the lowest payment of a NEGATIVE AMORTIZATION instead of the highest, fully indexed payment, as should have been an industry standard for underwriting “safety and soundness.”

    The NEGATIVE AMORTIZATION feature of the OPTION ARM LOAN was NEVER FULLY DISCLOSED to me prior to the closing. This was a material misrepresentation to a fact and clearly produces FRAUDULENT INDUCEMENT. A reasonable person would have NEVER gone through with this TOXIC, EXPLODING LOAN that would severely damage my family’s lives for over the past 3 years, ruining my (our) great credit, costing me (us) 100,000’s of dollars, and losing potentially millions of dollars in income – past, present and future.

    The terms and conditions of my entire loan changed at closing. So WHY did I not “see” all of the changes? Because I WAS NOT AT THE CLOSING. WAMU failed to meet the first closing date, I was out of town on business, and my wife and realtor went in my place. HOW WAS MY WIFE TO KNOW OF ALL THE ABRUPT, UNFORSEEABLE CHANGES made at the eleventh hour and 59th minute of a arduous two month process of merely buying a home? WAMU knew I was NOT going to be there to “catch” the changes.

    WAMU certainly never expected to meet a Rob Harrington, or thousands like me, who would devote the rest of their lives to investigating and prosecuting the FRAUDULENT LENDING PRACTICES AND PATTERNS of “banks” like WAMU. I possess over 3000 additional pages of other documents, 100’s of phone calls, 1000’s of emails, and have researched and interviewed countless victims of (alleged) fraudulent and forged assignments and (alleged) illegal foreclosures across the country. The (alleged) abuse of process in the courts today by the corporations and their attorneys are a shameful recognition of how truly corrupt the process is against the homeowner.

    The OTS, the most “shopped regulator” in the history of our country, “encouraged” banks like WAMU, Countrywide, IndyMac, World Savings, etc., to violate the very laws the OTS was supposed to enforce to protect the consumer.

    Additionally, the FDIC is complicit as a “lax” regulator, who not only paid bonuses to their employees during the fraudulent boom, but they now stand in the way of WAMU homeowners seeking legal redress and are (allegedly) forcing FRAUD UPON THE COURTS/AB– USE OF LEGAL PROCESS upon struggling homeowners who really cannot afford proper legal representation. Furthermore, the FDIC profits from REO dispositions of foreclosed houses by the same failed (Bankrupt) banks who perpetrated the massive bulk of LENDING FRAUD. JPMorgan Chase is (allegedly) complicit in this scheme, as well. (Please reference the TEXAS ACTION in WAMU vs. FDIC/JPMorgan Chase – Delaware Bankruptcy Court)

    A CRIMINAL AND CIVIL RICO CONSPIRACY EXISTS, and I bet you a dollar, not one word comes out in the sub-committee hearing (with Kerry Killinger and Steve Rotella) regarding the inherent criminality of what the mainstream media has universally termed “lax and reckless lending.” I promise you, by GOD, this will become exposed to the mass public, with or without their help. May GOD help anyone who hides and masks the truth as has been done so far. That would make many in Congress and Government – AIDERS AND ABETTORS – to a criminal and civil conspiracy, before, during and after the fact.

    Shame on our Government (and BOTH POLITICAL PARTIES,) paid for by the taxpayers and citizens, the body that was supposed to protect all of us from the excesses and unfair profits of PROVABLE ORGANIZED CORPORATE FRAUD.

    My name is Rob Harrington. I will swear by oath and attest that my 3 years of (almost) daily research and investigation will reveal the TRUTH about organized fraudulent lending.

    Feel free to interview me, and the MILLIONS(?) of consumers who were most likely victims of LENDER FRAUD between the years of 2003 – 2007, especially by WAMU.

    Consumers should NOT be expected to have to become attorneys who specialize in Real Estate Law, Contract Law, Finance Law and Securities Law… simply to buy and own a HOME!

    The ONLY SOLUTION to fix our country and economy, is to investigate, prosecute and incarcerate corporate criminals and make the consumer victims of Corporate fraud whole again. Anything short of this solution and goal is treasonous and criminal.

    Nina, please share this email with the distinguished members of this very important Sub-Committee. Thank you and your members if their work is really designed to lead to real change that we as citizens can (finally) believe in.


    Rob Harrington
    Co-Founder & Un-Paid Volunteer/
    National WAMU Homeowners Support Group
    Niceville, FL
    (850) 259-6422

  3. PJ says:

    2 Diana, agree with you that there is a much bigger picture to be looked at here…, however come for the world of mortgage obligations where at closing you practically had to disclose the color of your under pants… there are plenty of people out there that purchased homes 10 plus years ago before the “housing frenzy” that currently have modest loan obligations, equity (for now) in their property and are saddled with exhorbinaent “property taxes” due to developers, flippers and speculators that where on a tear starting in 2004.

    Watched it with my own eyes… as modest homes in working class neighborhoods were torn down and a Mc Mansion erected over night and sold for 10 times more then the current value of homes around them, placing egregious, regressive and inflated assessment’s on working class people, young families and long established seniors that could no longer pay their property taxes.

    In effect once multi-generational vibrant neighborhood’s became victims of something they never wanted to, or where any part of, they are the “unspoken for” and hardest hit by this crisis.

    Have watched a staggering “brain drain” both young and old, including small business owners from the state where I reside due to the feeding of the “mortgage machine”, and the subsequent insatiable “local and state” government spending machines that act as if nothing has changed.

    There is plenty of “unmentioned” subsequent fall out occurring all over this country, take for example %10 plus unemployment, effecting people that did not subscribe to and or buy into, nor take out a no doc loan/liar loan.

    If people have found that their personal information has been falsified by a local agent, that is an open case for fraud and they should be bringing it to the courts on a local level, where real action should be brought against the offending party… as in the case of one who posted above, her friend the broker with a house in Arkansas… move to strip said offender for undue proceeds, “Unjust Enrichment” in civil court where and when you can prove fraud…

    With that,just a hunch but those 16 thousand IRS agents, enacted immediatly, voted in under the current Health Care Bill, may well be getting to work on this issue very soon…

    • Diana Cessna says:

      Yes PJ, the collateral damage started long before anyone cared. This is a sad truth. I started in the industry in the early 90’s where as you said, all but the color of the underpants that you wore to closing had to be disclosed. I don’t disagree that the market needed flexibilty then in order to spread the opportunity of homeownership to more people. The problem was that there were very low standards in the “professionals” that had the authority to advise, originate and approve these programs. I was recently reminded by a collegue that now, as it was then, there were and are many scammers and shaddy people taking advantage of people by telling them what they want to hear and easily accepting their willingness to get screwed. And now, as it was then, there are people like us that chose to work with character and honesty and actually do help people with good, solid and sound financial and real estate advice. Unfortunately, the one thing that has always been constant in my 19 year career in this industry is “don’t underestimate people’s willingness to get screwed”

  4. Liz Frey says:

    This is exactly what happened to us. Countrywide, Wamu in our case
    Income figures were Magnifide, signatures were falsified.
    someone even had the odasity to write a letter that my son was taking care of my financial records and they signed his name.
    I never heard of the banks they mentioned.

    I never knew this til the Regulations Dept went and got copies
    of the applications. (I never received them)

    My question is also in our case we dealt with one relator
    and he knew we were not in a position financially to afford these homes. HOW did it get through his broker. We had two and I signed for two for my son. (He is in the same position with this he has seven)
    He works in a steel mill at a wage roll job. they even had him down as plant manager and driving some luxiours car)
    I had told the realtor I wanted to pay off my home with money we had made on a property. He convinced us that wasn’t the way to go. We were not knowledgeable and trusted him , he was a close family friend I did not even know what an arms was. All he wanted to do was make money so he would be listed as the #1 broker when these houses went through. They also should share blame for this. He ended up buying a home in Alabama for himself, his wife and son. The realtor – broker and mortgage broker knew our situation. We trusted them. Our home we live in now is in foreclosure.
    I am glad this is finally coming out about what they were doing
    to the American people.

  5. G.WINCHEL says:


  6. Diana Cessna says:

    Moreover, the “loan officers” at the large banks were not personally and individually licensed and they were trained only to know what their management wanted them to do. They often times did not work or live in the community where they were originating loans. They did not know the reprecusions of a lot of what they were doing. They were just coached to close their deals and produce the numbers that their management wanted. But, ignorance is not a defense. When the all but extinct community Mortgage Broker used these aggressive mortgage products, most used them responsibly. Mortgage Brokers were individually licensed and accountable. They were required to maintain their licensing through continued education and studied regulations directly, not an interpretation of them from corporate managers. Moreover, they had more at stake if one of their clients got into trouble with a home that they couldn’t afford. Because the neighborhood Mortgage Broker, lived and worked in the community, they wanted to keep the community strong and never would blanket neighborhoods with loans that would likely default and lead to a foreclosure mess of abandoned properties and plummeting property values. They oftentimes, needed their clients to continue to be viable buyers for repeat business and referrals as well. It was a more professional way to do business. The large banks easily campaigned to all but shut that down. I wonder why???

  7. Diana Cessna says:

    What’s right for the apple is not right for the oranges and what’s wrong for the oranges is not wrong for the apple. You cannot judge right from wrong in this mess. This determination is based on different factors for different entities. The stated income or “liar loans” were just one of the many products sold to a consumer base that was manipulated to play along with the gambling of investors 80 stories up. Bank loan officers were very easily manipulated to follow their corporate culture and had very little accountability or personal stake in the business. It was a time of equity lending. The lenders were making their money buying and selling these mortgage in their bundled securities and as long as the real estate values were increasing, everyone got a nice piece of the pie. It doesn’t matter that borrowers were not required to document their income. The income that was stated sometimes was from sources that could not be documented, but it was more accurate and reliable than any other, but that’s not at all the point. The “liar loan” rant is a distraction. Many of the bank products of the boom were also simply “no doc” or “no income” or “no employment”, the actual underwriting guidelines actually stated that the borrower need not even state that they made any money or had any employment. Yes, really, everyone in the field at the time knows that. It was purely equity lending and gambling – with money to be paid on both sides, if the loan performed or if the loan failed. So for all you that think that this problem was caused by people “lying” about their income, you are wrong and have your head still stuck in the sand. Thankfully, the truth about the true gamble that was orchestrated by the puppet masters is starting to come out. Unfortunately, it’s easier for people to believe that this is a problem isolated to people that they can pass judgement on for “lying” or being “deadbeats”

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