"Yet the system itself bears blame. The evolution of mortgages into a securities instrument turned loan origination into a competition. Caution gave way to a push for speed and volume. Embroiled in an all-out war for market share, issuers reduced barriers to credit, for example, by offering so-called "stated-income" loans, which require no proof of income. "The stated-income loan deserves the nickname used by many in the industry, the 'liar's loan,' " says the Mortgage Asset Research Institute, which works with lenders to prevent fraud. A recent review of a sampling of about 100 stated-income loans revealed that almost 60% of the stated amounts were exaggerated by more than 50%, MARI says."
"But some defense attorneys went on the offensive and attacked lenders for failing to guard against fraud. Particularly illuminating was the testimony of Lucy Lynch, a former vice president of mortgage operations at BankFirst.
"Fraud was not really a consideration in our world," Ms. Lynch testified, according to a trial transcript.
Ms. Lynch said the bank relied on an outside "loan officer" at a reputable mortgage broker to serve as its "eyes and ears" in the real-estate transactions. As it turned out, that person was indicted as part of the fraud ring. Ms. Lynch stressed that the bank took measures such as running all loan applications through a software program designed to detect fraud. "And things that didn't seem quite right, an underwriter could quickly pick those things out," Ms. Lynch said, according to a trial transcript. "So as far as having an actual policy or procedure around fraud, we didn't think it was necessary, quite frankly."
Bear Stearns and BankFirst are now eating mountains of FRAUD for Christmas dinner! They bagged their own dinner by not doing oversight and due diligence on their own behalf. My Holiday wish for them is that they get indigestion followed by extreme nausea followed by the backdoor trots so severe that their bottoms get sore.
Sauce for the goose...they have created these health problems for many others. Wonder how they feel being on the receiving end for a change??http://online.wsj.com/article/SB119820566870044163.html?mod=googlenews_wsj