A Loan Officer I know was recently contacted by an old client. This client had bought a home a couple of years ago. The client had a cushy job as a sales manager and made good money at the time of the purchase, but since he had just recently been promoted, did not have the two full years of of income needed for full doc. But, he had great credit, so they went Stated Income, Stated Assets. So far so good, right?

Well, six months ago, the company that the client worked for went out of business. He has had trouble finding new employment at the same income level, and so... he lost the house. The original lender, First Bank, had long since sold the note to Countrywide.

Since it was an over-80% loan in the first place, there had been Lender Paid Mortgage Insurance. The MI company requires that before they will pay off to Countrywide, they must perform a fraud investigation. So the investigator calls the client and demands a new Form 4506, allowing him to look at the clients past tax returns. The investigator mentions that if the numbers don't match what was on the loan application, then the loan officer will most likely be prosecuted for fraud.

Think about that for a second. On a Stated Income, Stated Asset Loan, where the borrower is NOT REQUIRED TO PROVE A DAMN THING, they intend to prosecute the loan officer for fraud; even though the loan officer very likely never knew the true numbers.

Now, the happy ending in this particular instance is that the client refused to sign a new 4506. In fact, based on the description I have heard second hand, it appears to me that the investigator may have nearly committed some sort of fraud himself, in that he VERY strongly implied that the client was legally required to sign the new 4506. The client told him to jump in a lake, so there is nothing further to investigate, but I wonder how many loan officers are going to go down for the banks' crimes?

Remember, I was there. I SAW WITH MY OWN TWO EYES just how often that the bankers Account Executives would tell the loan officers EXACTLY how to massage the app so that it could be approved. In way too many cases.

The STILL HERE Loan Officer!

                          Go ahead. Click it...