Must Read Report | Calvin Townsend, A Speculator, Takes Blame for the Mortgage Mess

A Speculator Takes Blame for the Mortgage Mess: Leonard Goodman

By Leonard Goodman

In July, following a monthlong trial, a federal jury in Chicago convicted my client, Calvin Townsend, of four counts of bank and mortgage fraud. Later this year, he will probably be sentenced to federal prison.

Townsend is one of many minor players paying a heavy price for their roles in the mortgage meltdown, while the major figures avoid any responsibility.

Townsend is a 52-year-old black man from the South Side of Chicago. He had been a train conductor and a part-time real-estate agent until 2005, when he attended a seminar on how to use other people’s good credit to invest in property with no money down.

During the next two years, Townsend used such “nominee purchasers” to buy 21 homes. Eager-to-please mortgage lenders provided 100 percent financing for the loans, which were then repackaged by Wall Street investment banks and sold to investors.

About a week after each home purchase, Townsend would enter into a written contract with the nominee buyer in which he agreed to make all the mortgage payments and to pay the buyer a flat fee of about $15,000. In return, Townsend got the right to re-sell the property and realize the anticipated gains from the then-rising housing market.

Townsend was true to his word, using the large commissions he earned as the agent on these sales to make 210 mortgage payments on his properties. But in 2007, after the housing market collapsed and none of the properties would sell, his money ran out, and all of his loans went into default. He lost everything, including his own house, and moved his wife and two children into a Comfort Inn.

In 2008, the U.S. government indicted Townsend, together with 20 others on the bottom rung of the mortgage mess, for fraud. Townsend pleaded not guilty and was tried along with a loan officer he had worked with; the girlfriend of the man who ran the how-to-get- rich-in-real-estate seminars; and three nominee purchasers who had bought properties for the seminar leader. All of the defendants were indigent and qualified for court-appointed counsel. I was picked to represent Townsend and, at the conclusion of the case, I will be paid $125 an hour by the U.S. taxpayers.

Accusations of Fraud

During the trial, the prosecutors argued that Townsend had defrauded the mortgage lenders — including Countrywide Bank, Fremont Investment & Loan and Washington Mutual Bank — by failing to disclose his arrangements with the nominee buyers. Executives from these lenders testified about their strict underwriting policies on mortgage loans.

On cross-examination, I tried to point out that the lenders, banking on short-term profits, had encouraged people such as Townsend to bring them more and more loans, regardless of the borrowers’ ability to repay, and then sold their bad loans to Wall Street. These very lenders had been advertising “liar loans” with “no income verification required.” In a rare unscripted moment, one nominee buyer (who was a cooperating government witness), said the lending banks “just feel your pulse and see if your heart is beating and give you a loan.”

I tried to convince the judge that the jury needed to know the truth about the lenders in order to determine whether Townsend had had any intent to defraud and whether he had made any material misrepresentations. But the judge accepted the federal prosecutors’ argument that the sins of the lenders were “irrelevant,” and that if such evidence were introduced at trial, there would be a risk of “jury nullification” — that is, the jury might be tempted to acquit the defendants because others not on trial were more culpable. No evidence or argument about the corrupt practices of the lenders was allowed.

It was not technically illegal for Townsend to make his financial arrangements with the buyers after their purchases. Nor did he have any obligation to disclose them on the federal Housing and Urban Development closing statement, which requires disclosure only of payments made at the time of closing. Nevertheless, the prosecutor asked the jury in summation about Townsend’s arrangements with the buyers, “Don’t you think the lenders would have wanted to know?”

In all likelihood, the true answer is no.

Townsend and the other defendants were convicted on all counts, and each one accepted the jury’s verdict quietly.

On the way out of the courthouse, the former loan officer lamented that she had stayed out of trouble all her 45 years and now faced a lengthy prison sentence merely for doing what the bankers had wanted.

Three days after the verdict, I received a letter from a distraught juror, who said she had held out for Townsend longer than the others, indicating that she knew the lenders’ loan practices had been predatory. “It is small consolation, I know, but I will tell you that my conscience is not clear.”

In the 1980s, Operation Greylord exposed rampant corruption and bribery in Chicago’s state criminal courts. One side effect of this corruption was that criminal defendants who didn’t pay bribes were given maximum prison time so that the corrupt judges could appear to be tough on crime. A similar thing is happening now in the cleanup of the mortgage mess. The politically powerless are getting clobbered to make it appear that the government is serious about cracking down on fraud.

It’s easy for prosecutors to win convictions by going after the little guys. But this strategy does nothing to punish those most responsible for bad mortgages; nor will it deter future incidents of fraud.

(Leonard Goodman is a criminal defense lawyer in Chicago. The opinions expressed are his own.)

To contact the writer of this article: Leonard Goodman at

Article reposted in full for educational purposes and to document the failures of our government…

SOURCE: Bloomberg


9 Responses to “Must Read Report | Calvin Townsend, A Speculator, Takes Blame for the Mortgage Mess”
  1. Bobbi Swann says:

    I feel bad for this person because he was “sucked” in by the power of greed and listened to the evil drummer who played his ‘get rich’ scheme. These seminars were all over the place at that time and gullible people who paid to attend ($$$) went out and about without checking the consequences. The nominee buyers were usually ‘straw’ buyers used as a 3rd party in a transaction to further inflate the value of a property thereby allowing this person to walk away with thousands of inflated equity. The bankster is at fault, yes, but submitting mortgage applications for people who don’t exist or never intended to own the property is fraud as well. Most of the time, at least here in Flori-duh, those ‘straw buyers’ were paid a commission ($15K in this instance) to act as official buyers as a means to inflate the property and that was the only ‘intent’ they had. Greed is a very powerful emotion effectively used by Satan. Several RE agents, and others are now serving terms here just for that reason. The sad part is that nothing happens to the Wall Street maniacs or the banks who pushed this shit. It was like a maniacal frenzy on who could accumulate the most wealth using the real estate bubble at the time. Again, I feel bad for this person but ignorance of the law is not a defense. How many properties did he own at the time? 21…realistically, this man was not a experienced investor; he was just a train conductor for God’s sake and only a real estate agent part time for 2 years. It was the last person on the totum pole at the end who got stuck with the higher inflated values when the bubble burst, so where’s the justice for these people who owned these homes? There’s where just a part of the inflated wealth went….right into these people’s pockets. Shame, that the banks are still getting off the hook with their part in this whole scheme.

  2. qwester says:

    Miracle of Miracles for the lenders, banks, and servicers. THERE ARE NO Google links to the federal court trial itself. It is obvious that the banks have coopted Google to blank out this trial and conviction because of the stench of it. This is typical Chicago – DEMOCRAT – Obama protection. Animal Farm Orwellian irony par excellance. Only statements by the defense attorney and a guilt ridden juror are pointed to in feeble efforts by Google to appear unbiased. I wonder how much Google charges the banks to block taboo searches like mine.

  3. Boomie cotton says:

    This is very sad

  4. lvent says:

    Time for We The People to break down the Foreclosure-gate……Start filing police reports on all of the mortgage fraud en masse..That will get the attention of the States Attorneys that we are mad as hell and we are not going to take it anymore……

  5. lvent says:

    As usual they blame it on the little guy…this is disgraceful…but par for the course unfortunately…there are many more at the top of this Ponzi Sheme who are way more deserving of heavy prison time…they are going bottom up and there is a Foreclosure-gate preventing the criminal prosecution of the top fraudsters…..this is wrong…the top dogs were the perps to and following the orders of their ruling elite NEW WORLD ORDER MASTERS but they deserve prison for what they did. They blew up the world’s economy and it was intentional and intended to cause permanent financial harm to to all of us..little guys..

  6. John says:

    Its a felony to file a false report with a federally insured bank. It is OK for that bank to do wrong by you.
    This has got to stop.
    Hopefully it will soon or in the next election when so many get ousted.

  7. maggie May says:

    Sure blame him!

  8. Ron Moss says:

    You could tell by looking he just looks guilty. While the bankers masquerading like honest business leaders not terrorists like they really are.

  9. Litgant says:

    Case of the shyster judge in the hands of the banks again. Shyster judge. Shyster judge. And now because of a shyster judge some children will not have their mom or dad at home for many years. While the other criminals keep raking in the billions and with this pay the shysters under the bench. This is sick America, SICK!

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