The Biggest Theft in the History of the World and Our Government Bails Out the Perpetrators!

Did you hear the news?  Citigroup may have to pay a $7 billion settlement to resolve mortgage probes.  Why?  To get the government to stop looking into whether it defrauded investors on billions of dollars worth of mortgage securities.  Most of the payment will be in cash, but it will also include a few billion dollars to help struggling homeowners.  How magnanimous of them!  Citi created hundreds of billions of dollars worth of fraudulent mortgages, and now that they’ve been caught after 7 years of foreclosing like crazy on their fraudulent mortgages, they’re finally going to cough up a few billion to help out some of the people they haven’t foreclosed on yet.

This news brings to mind a case I read about recently where a REGIONAL bank had the owner of a property falsify mortgage documents in order to originate a riskier loan.  That’s right, the regional bank has the owner of two VACANT lots certify that there were houses on the two lots.  Then the bank made a loan as if the nonexistent homes were actually on the two vacant lots.  Why on Earth would the bank lie and increase their risk by loaning out so much more money than the land was worth?  It was all part of a large scale scheme to rake in as much money as possible by defrauding the bank’s investors.

The only reason a bank would ever behave like this is that they were never loaning their own money in the first place.  This was a securitized loan.  The bank used investors’ money, and thus had no risk of losing anything if the loan was not repaid.  The bank’s mission was simple:  crank out as many loans for as much money as they could and then lump them together into massive bundles of junk mortgages.

So who paid the bank to do this?  Broker dealers paid the banks to originate and bundles the loans together so that they could sell the resulting toxic mortgage bonds to investors who didn’t know any better.  The broker dealer would then eliminate their own risk by dumping defaulted loans into empty, unfunded trust entities.

This whole process was designed to make it appear that there was a legitimate lender that was qualifying borrowers and writing good mortgages.  In reality, the originator and aggregator of the loans never had any risk and therefore had all the reason in the world to grant loans to unworthy borrowers and, in some cases, flat out lie in order to loan out more money.  The broker dealer who paid the bank to originate the loans and then sold the aggregated loans as mortgage bonds never faced any risk either.

So what did the government do when this started to be discovered?  When the foreclosure crisis got going, the Federal Reserve started buying the toxic mortgage bonds from the banks at the rate of $60 billion per month – a total of around $3 trillion!  The banks have been settling with some investors, insurance companies, and other parties damaged in the process, but these settlements only amount to about $1 trillion.

So they committed the largest fraud in the history of the world, and they’re able to get the government to stop looking into it for only $7 billion.

The fact that the courts are finally wising up to the games the banks played is creating a massive opportunity for real estate investors. If you know of anyone with a defaulted note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last two years building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing fraud committed in the mortgage process and using that fraud as leverage to negotiate the sale of notes.

We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies. We finally have the leverage we need to get the banks negotiating on our terms. It doesn’t even matter if the homeowner has already been foreclosed on, we might be able to help.