Here's a sad expose about a Loan Officer recently convicted for mortgage fraud in Seattle. The only problem is that this article, while well illustrated on the front page of the Seattle Times, is that it leaves some doubt as to just who this crook represented (besides himself). He is apparently not blonde. We can assume seven years in the slammer will be no fun whatsoever.
The article about Chris Brooks, a former loan officer at America Mortgage of Bellevue, paints the suggestion that he was working as mortgage broker. What really bugs me is their use of the term 'loan originator' on their graphic expose as the bad dudes who originate fraudulent loans in this case.
The graphic illustration occupied half the front page on February 27th. Graphic link: http://seattletimes.nwsource.com/ABPub/2009/02/27/2008792274.pdf
The reporter handily did not bother to mention that America Mortgage who employed Mr. Brooks is a mortgage lender, i.e., a national mortgage bank with their own investor relationships for whom they underwrite and package loans, and not a mortgage broker. It appears that his company, America Mortgage, actually underwrote and funded these fraudulent loans and sold them to other banks while Mr. Brooks, a convicted felon, was operating as an unlicensed bank loan officer at America Mortgage.
Surely his employer might be drawn into the discussion in a fuller examination of his complex scheme? Had his company been exercising standard underwriting practices requiring document authentication on so many transactions, staff would have been alerted to the hidden schemes outlined. The author does not mention if his employers at America Mortgage were named co-conspirators and also tried. How could they not be aware on some level? There were far too many people involved in his deceptive practices described in excruciating detail.
Please understand that the very programs named in this article, namely those featuring 'no income verification' were inventions of banks, not brokers. Brokers do not invent loan products. Only banks who are investing their money can cook up these loan products. They do so to fill their coffers with more loans to sell to the CDS market. Perhaps you've heard of the result there?
In the Seattle Times article, the story is illustrated by a colorful graphic outlines the 8 steps for "How a Loan Becomes a Scam: I note item 4 on this chart identifying the 'loan originator/mortgage broker': "Using the appraiser's report, a complicit loan originator submits a fradulent application on behalf of the straw borrower..." (you know the rest of the story, apologies to Paul Harvey, may he rest in peace).
It appears lots of folks do not realize the difference in an unlicensed 'loan officer' working for a lender or bank and a licensed 'loan originator' working under a broker's license. This story calls Mr. Brooks a loan officer in one sentence and refers obliquely to loan originators as the culprits of these scams. This is misleading; I contend that many people reading this article assumed Mr. Brooks was working for a mortgage brokerage, as did two loan originators to whom I showed the article.
The mere connection of the words 'mortgage' and 'fraud' conjure up powerful emotions blaming greedy sleazy brokers working under cover to defraud the innocent. This kind of half-reporting is a disservice to honest mortgage brokers and loan originators who must 1. only hire legally licensed staff who have passed national background and criminal checks. and 2. adhere to much stricter lending and disclosure standards that unlicensed loan officers in banks.
Why are banks allowed to have unlicensed staff (and not disclose as fully as brokers do) you ask? Because it's 'their money' for the millisecond the paper is on their books, before it is sold to another bank or Government Owned Enterprise such as Fannie Mae.
I have respectfully requested a fuller reportage of the facts with an apology for the writer's unfair slant against mortgage brokers. Really we are done to death with the tar and feathers. Please go after the real criminals.
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