Mortgage Fraud: The Untold Story of the Housing Meltdown

Was the financial crisis caused by “systemic failure” or mortgage fraud? Or a combination of the two? And why are so many American homeowners still paying the price?

When Travis Paules worked as a branch manager for American General Finance in Pennsylvania in the late 1990s, he tried to do things by the book. He didn’t cut corners, he recalls, because his bosses at the finance company made it clear that it didn’t want him to cut corners, and that he should balance the need for loan production with the need to make sure his front-line staffers weren’t sticking borrowers into deals they couldn’t afford. Back then he liked to say: “My personal morals aren’t good, but I have good business morals.”

Things changed for Paules in 1998.

Ameriquest Mortgage, one of the nation’s most aggressive home-loan shops, lured him away from American General. At Ameriquest, Paules recalls, he found an employer that encouraged – and rewarded – his unscrupulous instincts. Paules pushed his underlings to do whatever it took to book loans, and they responded by employing a variety of tricks, such as inflating borrowers’ incomes on official documents. In some instances, he says, he even allowed his workers to alter the dollar figures on elderly borrowers’ Social Security award letters.

“You’re a creature of your environment,” Paules told me. “You don’t have to be. But most people fall into that trap.”

I thought about Paules recently after I read an article in The New York Times by Chrystia Freeland, a global editor-at-large for Reuters. Freeland praised the work of investigative reporters who had exposed wrongdoing in the financial sector, but added that “the bigger, more complicated truth about the financial crisis is that it wasn’t caused by evil businessmen. The overarching story is one of systemic failure, not individual wrongdoing. It wasn’t the Bernie Madoffs who plunged the world into recession. It was low capital requirements, weak limits on leverage, over-the-counter traded derivatives, soft rules on mortgage lending and global financial imbalances.”

Freeland is correct that all these factors contributed, in a big way, to the making of the crisis. But her argument has some holes in it.

First, it doesn’t acknowledge that real people were behind the systemic failures. The financial crisis wasn’t an act of nature; it was a man-made disaster. Corporate executives lobbied hard to get regulators to weaken oversight of banking and lending, pushing for the “soft rules” that helped create the home-loan mess.

Second, it minimizes the role that deception and corruption played in the debacle. As the housing market heated up, and the hunger for mortgage-backed investments grew, Travis Paules and other mortgage professionals cut corners and crossed lines. Appraisers falsified property reports. Mortgage brokers and loan officers forged borrowers’ signatures on key paperwork and faked tax documents to qualify homeowners’ for loans that they couldn’t afford. Lenders and Wall Street banks misled investors about the quality of the loans and the quality of the securities that were backed by those loans.

Read more: Mortgage Fraud: The Untold Story of the Housing Meltdown

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One Response to “Mortgage Fraud: The Untold Story of the Housing Meltdown”
  1. Trust of K.Gramly says:

    “alledged” FORECLOSURE FRAUD; UNFAIR BUSINESS PRACTICES THAT CA– USE FORECLOSURE, PUBLIC HUMILIATION, CREDIT REPORT DAMAGES, LOSS OF REFINANCING; UNLAWFUL WRONGFUL PROCESS: law office of david stern;bank of america; countrywide

    COUNTRYWIDE AND THEN BANK OF AMERICA SABATAGED REFINANCE OF VA STREAMLINES 2003 AND 2010.
    Countrywide sabataged according to attorney blatently a 3.4% streamline preapproved no income verification, nocredit check,only stipulation was perfect payment history which we had, and an appraisal. We had large equity in home. Lost loan fee, lost legal fees, attorney wanted $10,000 retainer to file legal action which we did not have (retired). ; difference of 3.4% vs almost 8% makes a huge diffreence in the quality of life of a senior. . Then again in Dec. 08 to March 10, 2009 again sabataged blatently another refinace attempt same terms on streamline except 4.%, a 4.3%, a 4.5% being offered. I refused to have Bank of America as our lender and stated I was refinancing before end of March 09 to be completed before Bank of america was to take over loan. Sabataged again. They forgot to take out autopays which had been on auto since 1996; sent late defaults to credit reporting, Feb and March (I had paid in advance Aug 08 to Feb 1) No mail came stating Feb was not processed, no mail came stating March was not processed; late March got default notices, called duncan at Home retrention team who stated bank had made error, ooops, comitted to fix credit. Loan refiance now not possible as my ‘perfect payment history’ destroyed’ and now credti report showed default. Lender did not take it off credit report. We have been since 1998 off public records on confidential status, now names linked with address and public records causing reckless endangerment of my life, property,pets.
    I faxed, mailed, 3 hours on the phone each month and repeatedly they failed to process the autopays, then charged late fees, then more than doubled my property tax;I sent itemized sttement for 2009 taxes calculated by property apprasier;ignored; demanded adjustment as it more than doubled my payment; anyother autopay not porcessed and late fees added; my heart got worse from the stress, havingto pay someone to type,fax,mail, mailing both countrywide and bank of america-5 addresses, not sure who was handling it; repeatedly told nothing was wrong with autopay ,account showed on the loan account, not sure why it was not being processed. Refused to pay until they corrected amount due, removed wrong more than double tax, sent an itemized accounting of what was due stating I would, even though they were in error, pay current when I got corrections and itemized billing. Ignored, no response in any form. Sept got a weird disjointed letter no making any scense. Sent same letter again from July, sent same letter in Dec.
    On Jan 11, 2010 we sent letter demanding to see documents that Bank of america had a legal right to hold/service the loan, demanded a forensic audit of the loan; stated there are problems with this account and demand it be corrected in 60 days, demanded a itemized accounting of what was not paid to date stating I would bring the loan payments current when I received an itemized statement of what was due, that I was refusing to pay late fees imposed on lendre imposing them when lender failed to process auto pay;sent copies of bank statements showing money was in account all the times they should have been processing the auto pays (sent that in Sept also); no response. Lender filed foreclosure on Jan 30,2010. via Law office of David Stern.
    I was told they are after equity as it is large, see senior, know live on little money…what is really going on???.
    however over 60 homes in my subdivision next –10 minutes- to : NASA/Disney cruise ship/cruise ships at port canaveral/airforce base/ocean/river/shopping/hospital are in foreclosure with BANK OF AMERICA.
    I HAVE NEVER RECEIVED ANY MAILINGS; NOW THAT THE HEARING WILL BE SET SOON, MAIIL IS BEING STOLEN OUT OF MY MAILBOX. I filed Respa documents, all ignored and not responded to; I never received any responses. I do not have a computor or computor access so cannot check records at clerk of court. This email is being sent via a friend. I am on restricted driving and alot of time bedrest due to heart.
    COUNTRYWIDE AND BANK OF AMERICA (SEE COUNTRYWIDE SETTLEMENT) cause breach of identity, compromising out navy number, social security cards front and back, drivers license copy, addrress, phones,bank data,credti card numbers front and bank…..over 30 persons now illegally using our addresses and data. Credit repport was 780 now reads like horror story. Google has me living in places I ‘ve never heard of.
    Someone needs to stop this. Thousands were compromised.
    My quiet, at home, simple spiritual lifestyle, my health, has been destroyed by these lenders business irresponsibility and unfair business practices , negligence.

    OTHERS STATE THEY TOO HAVE BEEN MANIPULATED AND FORCED INTO FORECLOSURE in our subdivision Imperial Estates, Titusville, Florida; built in the 60’s for the Kennedy space center employees, most are/were fannie mae, va loans.
    THIS IS NOT EQUITY, IT IS OUR RETIREMENT HOME, MOST OF US IN THIS SUBDIVISION, INCLUDING MY HUSBAND, RECEIVED VA LOANS, WORKED AT THE SPACE CENTER FROM THE 60’S ON CONCRETE IN 98 DEGREE 110% humidity HEAT 4 A.M. TO 4 P.M.

    ANY ASSISTANCE IN FIGHTING THIS IS APPRECIATED
    , I AM A SENIOR WITH NOW A ‘WEAK HEART,WEAK PULSE,ERATIC PULSE, LEFT VENTRICULAR REGURGITATION DUE TO STRESS’ CARDIOLOGIST AND DOCTOR=THIS IS KILLING ME.

    WHEN YOU DON’T KNOW THE RULES, AND YOU DON’T EVEN KNOW THE QUESTIONS TO ASK AND YOU DON’T UNDERSTAND THE GAME, AND YOU DON’T EVEN KNOW IF THE ANSWERS YOU ARE GETTING IS REAL…..IT IS EASY TO FALL AS PREY.
    NOW, THE AMOUNT ALICATED FOR 2009, 2010 PAYMENTS HAS BEEN PAID OUT TO DEAL WITH THIS=MORE STRESS.
    DO I SAVE MY LIFE OR MY HOME?? permission to reprint.
    email replys to ancientone33@yahoo.com appreciated however allow 3 days for replys;please keep short I am on someones computor.

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