By Helen Johnson

Ten Most Frequently Asked Mortgage Fraud Questions

1. What is Mortgage Fraud? Until recently the basic idea of mortgage fraud was that a
prospective borrower or agent of the bank or possibly bank employee was trying to deceive the
bank in order to get a loan. Here’s the FBI definition: “the intentional misstatement,
misrepresentation, or omission by an applicant or other interested parties, relied on by
a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.”

2. Is the Homeowner Guilty of Mortgage Fraud? If you are like most borrowers today, the
possibility of mortgage fraud in your loan has probably become of great concern to you. There
are many things to know about the area of mortgage fraud and of course one of the major
concerns for homeowners is if they are the guilty party. In 98% of the cases that we investigate,
the bank is the guilty party.

Because of the rampant growth in mortgage fraud reporting, the FBI has begun to investigate
the huge numbers of foreclosures instigated by deceptive loan practices, investment banks,
mortgage companies, securities dealers, hedge funds, real estate brokers, and others who have
profited dishonestly.

3. Who is most likely to commit Mortgage Fraud? “According to a May 2006 Financial Crimes
Enforcement Network (FinCEN) report, finance-related occupations, including
accountants, mortgage brokers, and lenders, were the most common suspect occupations
associated with reported mortgage fraud. Perpetrators in these occupations are familiar with
the mortgage loan process and therefore know how to exploit vulnerabilities in the system.”

4. Are Homeowners victims of Predatory Lending or Mortgage Fraud? In today’s loans, many
homeowners may very possibly be victims of both. However, there is also some overlap
between the two categories, which can make it confusing for the homeowner. You should just
keep in mind that if you are struggling in any way with your mortgage, then chances are you
need to get your loan investigated. It will contain either common signs of predatory lending,
mortgage fraud or both.

a. Predatory lending is the practice of putting borrowers into loans that they did not
qualify for and could never hope to repay. The most common name for a predatory
loan is a subprime loan. These are adjustable rate mortgages, interest only mortgages,
and often any kind of mortgage where the borrower is expected to pay more than 31%
of his NET income. Thus almost all homeowners are going to have mild to extreme
degrees of predatory loans, and that could very possibly put them into foreclosure.
Research shows that most borrowers are unaware that the bank gave them a loan
 designed to wipe them out, and that the bank immediately sold and or securitized the
loan after they approved the loan.

b. Mortgage Fraud can occur at so many different points – the broker misrepresented, the
bank ignored their underwriting obligations, or used software to underwrite, or simply
did not use prudent underwriting methods which was fraudulent of them – because
they were going to flip the loan to another buyer. Or, the bank accepted an inflated
appraisal (more often, they gave the numbers for the appraiser to meet so the loan
“could be approved”) the bank sold the loan without full collateralization, despite the
fact that they were identifying it as a fully collateralized loan. These are just a few
examples of mortgage fraud during the loan origination process, which is typically
where mortgage fraud is limited to.

5. Is it Mortgage Fraud when the bank is trying to foreclose on me, but they can’t prove they
own the note? It is probably more closely described as foreclosure fraud, fraud upon the
courts, or just plain fraud. However the action is directed at your mortgage, which is so often
why people are calling it mortgage fraud.

6. Why is it foreclosure fraud if they can’t prove they own the note? As any lawyer will be able to
tell you, the bank has to prove that they are the valid and rightful owner of the loan (note), and
thus have the right to foreclose. If they fail to show that they own the deed, the original note
and all its “wet signatures” (which means the original signatures, not copies) and all its
assignments (which is a critically important document showing that the mortgage has been
properly transferred from the original lender or borrower to a third party) and they file a
foreclosure suit without that proof, but claim to be the rightful owner, then that is fraud, and all
the judicial states, it is fraud upon the courts. Because it pertains to the foreclosure process it
often gets referred to as foreclosure fraud.

7. What is Robo Signing – Mortgage Fraud or Foreclosure Fraud?

a. First: A quick review of Robo Signing: It is the action of signing thousands upon
thousands of unread foreclosure affidavits by bank “vice-presidents” who were in fact
nothing more than minimum wage workers at a foreclosure mill (sweat shop more
realistically). Many had previously worked at fast food restaurants, and JP Morgan
Chase had nicknamed their robo-signers as the “Burger King Kids”. As was recently
exposed by CBS’s 60 Minutes, these robo-signers also happened to have the same name
in many instances and were “vice-presidents” for several different banks all in the same
day. They signed thousands upon thousands of affidavits claiming that they had
personally reviewed and had personal knowledge of the contents and that all was as it
should be to foreclose.
 b. Second: Was it Mortgage fraud? Technically, one could argue that it was, or that it
wasn’t. We’ll leave that up to the attorneys.

c. Third: Was it Foreclosure Fraud? Yes it sure was, but honestly you can identify that as
any kind of fraud you like in my opinion. That was blatant fraud perpetrated by agents
of the banks and the banks themselves.

8. Are the rumors that Robo Signing was really just a cover-up for a worse type of Mortgage
Fraud true? Technically, that’s going to have to be decided by the attorneys in court cases. Less
technically, absolutely! As well as a variety of other types of fraud, so we are safe to again
blanket the banker’s actions and robo-signer “cover up” as just plain old fashioned fraud. But, it
is fraud on a Gargantuan Scale. Trillions of dollars, millions of mortgages.

a. What is that fraud? In short, the banks defrauded the homeowner, the government,
foreign and domestic investors, insurance companies and each other through a process
known as Securitization. To help hide the actual fraud that they were involved in, and
under the guise of creating something more “efficient” than our county recorders
offices, they even created their own “ registry” to “track and assign” mortgages – and
operate as the Agent in foreclosure. MERS.

b. Why can’t MERS foreclose? MERS stands for Mortgage Electronic Registration System.
They were set up by the lenders for the lenders. Judges in key states have already ruled
that they do not have the legal standing to foreclose on homes. There are still millions
of active foreclosures where MERS has been named as the foreclosing agents because
judges can only make rulings in their courts and politicians have made no blanket rulings
preventing them from foreclosing across the nation. However, laws already exist that
make their actions illegal, so no new laws need to be passed in all honesty. The existing
laws need only be enforced. This is because the loans that they operate as agents for
were not properly securitized in the first place, we already had laws for that area, and
we have laws for proving that one is the rightful owner of a debt before proceeding with
foreclosure.

c. So, what exactly is Securitization? In its simplest terms, it is the process of turning
mortgages into stocks and/or bonds. Which, if done properly is legal, but the banks did
not do it properly. This left the banks with trillions of dollars in loans they actually legally
can’t foreclose upon, plus added Securities & Exchange Commission fraud to all the
other forms of fraud previously identified. Plus billions of dollars in lawsuits and
potential lawsuits from investors who bought those illegally securitized loans – which
are known as mortgage backed securities.
 9. What Can I do if I am a victim of any kind of fraud? With all the events that have finally been
revealed in the media and even by the government, your best action is to get your loan(s)
investigated. Don’t count on a government agency to stop foreclosures. The US Treasury
bought millions of dollars worth of mortgage backed securities, they also loaned billions to the
banks, and expect to get paid back – so if you lose your home in the process you should know
that your government is watching their own back, not yours. Sadly, the government puts on a
show of concern for the American homeowner, but they’re letting the lenders have a heyday in
rampant illegalities and “excuses as to why these things are really just minor oversights”,
because they can’t let the banks fail. Saving your home will be on your shoulders. So you have
to get the evidence of what was done to you as the first step.

a. A Forensic Audit will reveal any and all laws that the lender broke when he gave you the
loan. If you haven’t got one, you need to get one.

b. A Securitization Audit will reveal how/when/where your loan was securitized, and if it
was done legally or illegally. This of course will identify if your lender is defrauding you
and the courts by engaging in an illegal foreclosure.

10. Is there any hope that I can recover from Mortgage Fraud or any other type of fraud? Yes. But
only if you are willing to get the evidence of the fraud and work with professionals who know
the tricks the banks pull and/or legal support services. The bank will operate above the law and
take all that is precious to you if you do not arm yourself. Battle the bank with the right
documentation and proof and let experts help you do it. The result will be that you remain in
your home.

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