Tuesday, January 10, 2006

"Liar, Liar Pants on Fire" Loans

Here is an article about mortgage fraud vis-à-vis stated income loans. It seems it is ok to commit mortgage fraud as long as everyone is making money. I wonder how prevalent stated income loans are in Marin. Any Marin mortgage brokers lurking on this blog who are willing to post their thoughts on this topic (anonymously, of course)? In any event, it will be interesting to see what comes to the surface after the you-know-what hits the fan.

Some choice quotes:
While the big scams grab headlines, industry insiders caution that the bulk of the fraud infesting the real estate industry could well be a lot more subtle.

Stated-income mortgages do not require a borrower to provide proof of their income to a lender. Instead, a borrower "states" how much they earn on their application. Some local brokers said these loans seem almost designed with fraud in mind. They now refer to these loans as "liar's loans," because, they said, the freedom plays into the hands of unscrupulous mortgage brokers and borrowers.

Brokers and other industry insiders admitted such loans have made fraudulent income inflations a very common occurrence in the mortgage industry.

Sam Jarman, manager of Charter Mortgage in San Diego, made a conservative estimate that 25 percent of stated-income loans are fraudulent. However, he said such a figure was impossible to verify, because nobody seems to know how widespread the problem of inflated-income mortgage fraud has become.

Certainly, the FBI thinks such fraud is a problem.

Swecker attributed this fraud to inadequate oversight of the industry, particularly mortgage brokers.

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