Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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No explanation as to why Ocwen and Fairbanks were receiving so many complaints back in 2001 and 2002 before the great crash. You know, those simple "divorce and job loss problems that servicers can deal with so well". In those days it was apparent that servicers were having a lot of difficulty dealing with regular payments made on time....

 Somehow servicers manage to present themselves as victims in this report.

And if Fitch knew the loan files were riddled with fraud, how does it explain it's own complicity in rating this junk as AAA+? Guess Fitch is now a victim as well?

Here's a link to the entire .PDF report. Once you get past all the nonsense, there are some interesting facts and statistics:



In recent years, the subprime market became a race to the bottom.  Because of the capital markets’ voracious appetite for securities backed by subprime mortgage loans, originators engaged in intense competition to produce volume.  This emphasis on quantity over quality resulted in a lowering of underwriting standards and an increase in risky loan features.  As a result, beginning as early as 2005 and continuing throughout 2006 and the first half of 2007, lax underwriting standards prevailed and long-standing lending norms were routinely ignored.  In
addition, as demonstrated by the States’ Ameriquest Mortgage Company investigation and settlement, loan origination fraud became more common, particularly inflated appraisals and stated income fraud.  
This view is bolstered by industry studies.  For example, the rating agency Fitch recently reviewed a small sample of loans that defaulted within the first 12 months after securitization and concluded that fraud played a major role.  Fitch concluded that “poor underwriting quality and fraud” may account for as much as 25% of the defaults.Fitch further commented that, “[t]here was the appearance of fraud or misrepresentation in almost every file.”
Weak or non-existent underwriting coupled with high levels of origination fraud
combined to produce loans that had no reasonable prospect of being repaid.  Rather, these loans were originated based on the assumption that housing appreciation would continue indefinitely and that when borrowers ran into trouble, they would refinance or sell.   While this approach worked for a few years, when the inevitable leveling off and decline in housing prices began, the refinance option was cut off.  Because many loans were originated without regard for the
borrowers’ ability to pay, only in the last year have we begun to see the disastrous results of this reckless lending.  
Servicers are being asked to clean up the mess caused by reckless origination practices.  While the servicing system was well-designed to deal with traditional payment defaults due to life events such as a job loss or divorce, the servicing system was not designed to re-underwrite a massive number of loans that are defaulting due to failures in loan origination, such as loans originated with built-in payment shock, failures by lenders to assess a borrower’s ability to repay, or hidden fraud associated with inflated appraisals or falsified incomes. 
In our meetings, the State Working Group found much common ground with the
intentions and the initiatives of mortgage loan servicers.  Servicers agreed that it was in their interest and in the interests of secondary market investors who own securities backed by mortgage loans to work out loan delinquencies and avoid foreclosures whenever reasonably possible.  The leading servicers subscribed to the “Dodd Principles,” developed by Senator Christopher Dodd in May 2007.All of the servicers were implementing strategies to notify borrowers in advance of the ARM reset date.  All were increasing staff to deal with the increased
loss mitigation demand.  Most were enhancing efforts to communicate with delinquent borrowers, including contracting with third party non-profit agencies for that purpose.

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Foot 18 on page 12 of the report: 
Investors have concerns that some servicers, primarily those affiliated with the originating lender, may have incentives to implement unsustainable repayment plans to depress or defer the recognition of losses in the loan poolin order to allow the release of collateral provided by the lender to guarantee performance of the loans for a certain period of time.




No kidding.  Here is the credit default swap showing its true face. As most of us know, there has always been an incentive to manufacture a default and here it is, in the report.

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they got paid to give the AAA+ ratings, I would love to know how much a AAA+ rating cost?

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