Now we get into the fraud part


Debtors' Prison

You really have to read the underlying article, Reuters’ Felix Salmon’s report, to get the full flavor of what’s about to explode, but Business Insider has a nice summary: basically, banks like Bank of America hired a third-party to spot-check the loans it was buying and learned that, on a sample of perhaps 5% of the total package, 45% were fraudulent. Fine: BOA forced the sellers to make good on that slice of loans, but then proceeded to sell off the remaining 95% without warning the buyers that probably 45% of the loans were no good. And B of A was just one of the major banks engaging in this scam.


Really – it’s time to resume practicing law. Real estate used to be easy, compared to lawyering, but this stuff? Shooting fish in a barrel.


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6 responses to “Now we get into the fraud part

  1. just_looking

    Do it. Less problems, more money.

    If after a while you decide it is not so great, you stop.

    But get in there while the gettin’s good.

  2. You’ve made me so nervous about the two foreclosures we just completed in RI, I have called our lawyer a half-dozen times since closing, asking how sure is sure that the deal is a deal. I’ve forwarded him a link to your blog and asked him to chime in if he feels he could add some information…..that is if he hasn’t already put me in his spamanator folder for bugging him so much lately.
    I agree that you should go back to lawyering for the next few years.

  3. Anonymous

    US has world’s wealthiest and most entrepreneurial plaintiffs’ lawyers: free-market checks and balances vs corrupt or inept companies
    Far more effective than government lawyers/regulators or clueless, corrupt politicians who are conflicted by various donors

  4. Libertarian Advocate

    Heads may roll… literally. They can start with Barney Frank’s.

  5. Donato Loscalzo

    I agree with Chris, about going back into law. Some further food for thought:

    From Janet Tavakoli

    “What happens next?

    Really, it’s a mess, and no one is exactly sure. I believe it is likely the following will happen. First, if a “lender” tries to foreclose, it will have to have the proper signed paperwork showing it has the right to foreclose. If the note transfer wasn’t recorded, the bank can’t foreclose. But this is the most fundamental part of banking, so it is entirely the banks’ fault. We know how much they love “sanctity of contracts” when it comes to bonus agreements, so the same applies here.

    But it doesn’t mean the borrower doesn’t owe money. Obviously there will be records of payment and loan statements and evidence of delinquency. It will be difficult for the borrower to deny the existence of the debt and the obligation to pay. [If it is in doubt to whom the money is owed, then courts might put future payments in escrow, but it seems likely that it will be easier to establish debt/payment than foreclosure rights. Really, I don’t know, but to say the loan will be unenforceable when one can prove payments were made, doesn’t seem like it will fly in the courts.] But absent proper paperwork, a bank cannot take a house in satisfaction of the debt, so the bank will be an unsecured creditor. Once this is established as the case, if the borrower has the wherewithal to pay on say, a reduced principal balance and a lower fixed coupon, then the borrower will be in an excellent position to renegotiate the terms of the loan by offering to sign a properly documented mortgage. This may succeed where HAMP failed. I’m not saying it will be easy to sort this out, only that this has potential.

    Obviously, I don’t have the answer to the problem, and nothing suggested so far to courts (by the banks) is as reasonable as the above, but we’ll have to see what develops. In any case, states will insist that everyone follow the law.”

    Think about it: the debt stands but gets downgraded to Unsecured from Secured…….lots of work for lawyers, I would assume.

  6. fred

    buyer beware.
    as stated in an earlier post, the prospectuses and purchase agreements were written so badly that its anyones guess how they will be interpreted now. Due diligence is going to trump in all matters pertaining to investor purchases down to mortgage documentation.

    Don: Chris borrows $10,000 from you and you issue a promisary note that states he’ll pay you back in 10 days. In the meantime you lose the note and Chris decides not to pay you. What are your chances in court?

    Suppose the court already knows you, as they have caught you with ‘forged’ promisary notes in the past?

    Your chances of collecting are slim to none. Unless……the borrower agrees that he owes you.