Mortgage Loan Executives Charged with Fraud

Two former executives of a large mortgage company were arrested this week and charged with fraud.

Lieb Printer, a former officer of Olympia Mortgage Corporation is charged with scheming to defraud Fannie Mae of more than $44 million. Here is how it worked: Normally when a loan is refinanced the existing mortgage is paid off. Printer was refinancing loans but instead of paying off the existing loan he was pocketing the money. To hide his actions he did a variety of things such as altering the credit report of the borrower so the old loan which was supposed to show a zero balance, simply did not appear on the customers credit report. He did this on 257 loans! The new loans were backed by Fannie Mae and sold to Credit Suisse First Boston.

Barry Goldstein, also formerly of Olympia, is charged with creating dummy loan histories for the borrowers so they looked much less risky on paper than they really were. Mr. Goldstein is also accused of directing his employees to create dummy loan histories for borrowers. If convicted they could each get 30-year prison sentences.

If found guilty I hope they both get the book thrown at them. They deserve to sit in prison for the next 30 years. There are a lot of factors contributing to the mortgage crisis we are facing and one of those factors is fraud and corruption. Unfortunately this story is not getting very much attention. The above story I read on page 15 of the Financial Times, a publication that I only rarely read. I was traveling this past week and picked up a copy at the hotel at which I was staying.

I often wonder why some stories get very little coverage and other things that I think are much less important get massive coverage. In my opinion this story should be front-page news in bold headlines, and the trial should be followed on the evening news. Unfortunately, those who do not read the financial press will probably never know this story.

I would like to see fear stuck in the heart of every crooked loan officer in America. While it takes an FBI investigation or a large commitment on the part of an attorney general to uncover fraud of this magnitude, as a Loss Mitigation and Mortgage Default Housing Counselor, I see incidents of fraud on a routine bases.

Some of the fraud that occurs is admittedly hard to prove but anyone who works in this field knows that it occurs. It is not uncommon that loan officers falsify income or employment history to make the borrower more attractive to a lender than they are in reality. I have had several clients tell me that they thought they were getting one loan and then on the day of closing were switched to a different product. I have had clients tell me that they were urged to sign blank loan application documents and never realized their income had been massively inflated. I have seen very suspicious, apparently inflated, appraisals. Document forgery is not uncommon.

I am not so sure we need new laws. The laws already on the books simply need to be enforced. I would like to see Congress appropriate funding to Legal Aid organizations to provide legal assistance to those low-income clients who have been victims of fraud. Our local Legal Aid does a great job but they are so overworked that they can only take the most egregious of cases.

I would like to see more FBI investigation and federal Justice Department prosecution of mortgage fraud and I would like to see more funding of state Attorney General's offices to prosecute these types of cases. And, I wish we had a press that considered the stories of mortgage fraud and abuse to be newsworthy. The message should be load and clear that if you commit mortgage fraud, you go to jail.

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