Friday, September 10, 2010

Mortgage Fraud - "Double-Funding" or "Double Warehousing" and Assignment Fraud

The Federal Home Loan Mortgage Corporation, otherwise known as Freddie Mac, has been at the center of the sub-prime lending fiasco since the government takeover of the company in September of 2008.  The funds being committed by Congress to bail out Freddie Mac and its much larger sister company, Fannie Mae, are staggering.  The initial $741 billion approved by Congress grew by almost $100 billion immediately.  Divide that money up among every American citizen old enough to vote and we would receive $2.9 million each.

Sub-prime lending is only a part of the overall problem at Freddie Mac.  What is now beginning to surface are the losses attributed to the massive amount of fraud that mortgage originators created and passed on to Freddie Mac.  This blog focuses on two specific types of origination fraud know as “Double-Funding” or “Double Warehousing” fraud and Assignment Fraud.

“Double-Funding” involves a mortgage originator sending simultaneous funding requests for the same loan to two different warehouse lenders. Both warehouse lenders, unaware of each other, would send funding for the loan to the title companies specified by the mortgage originator. The mortgage originator then disburses the money from one lender to the borrower, while directing the title company to wire the money received from the other lender to mortgage originator’s bank account.  The mortgage originators then provide fabricated mortgage documents to the warehouse lenders that falsely represented that the lender’s funds had, in fact, been used to finance borrower loans.

Assignment Fraud involves modifications to the original loan where the name of the bank who actually owns the note is changed on execution of the Loan Modification Agreement.  The problem with these “modifications” (actually new loans with new “lenders”) is that the old loans remain unaffected. The existing cloud on title to the property, the mortgage deed (or deed of trust), the note, the obligation, the purported assignments etc. is being compounded by attempts to allow impostors to foreclose on the mortgage, collect on the note, modify the loan, or approve a short sale. The time bomb is title where securitized loans were recorded, foreclosed, modified or sold. The parties (other than the borrower and possibly the Trustee on the Deed of Trust) had actual knowledge that the “lender” was not the Lender, the terms of the obligation were already changed at the time of closing, the appraisal was false, the underwriting was negligent or fraudulent, the Good Faith Estimate was by definition rendered neither in good faith nor even close to an accurate estimate, and the list goes on and on.

This blog will attempt to give you to tools and examples to research whether you or your client has been made a victim of these types of fraud.

1 comment:

  1. Loan modification consists of several elements to help a person stop the foreclosure process and be able to stay in and keep their home.

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