Who is The Real Victim of Mortgage Fraud?

Bear Stearns announced their first loss in over 100 years and they blame mortgage fraud for a large measure of it. They are referring to a ring of people including a mortgage broker and even a Bear insider.

"We didn't do anything different from the rest of the industry" quotes the Wall Street Journal today. Bear Stearns says falsified income and asset documents are difficult to detect "if they are part of a sophisticated fraud ring," continues the Journal.

And here's a good one from that article: "...the closing attorney was part of the fraud ring. The 58-year-old lawyer, Raymond Costanzo Jr., known in the ring as "Uncle Joe," signed off on several fraudulent sales, and collected $250,000 from the scheme, the indictment alleges."

Bear Stearns isn't the only victim of mortgage fraud. What about the people who were pushed into loans that put $5000 or $10,000 into some mortgage broker's pockets…loans they could never pay back without getting another horrendous loan?

I spoke to a homeowner who got one loan in late 2006 that had a piggyback second on it at a 12% interest rate...then had to refinance in six months into an "exploding ARM" loan that is resetting to a higher and higher rate. This man is totally disabled. The mortgage broker lied about his income.

Borrowers wanted to play the game and speculate on appreciating real estate values. The lenders played along, giving money without requiring any sort of down payment.

But who funded these loans? The lenders simply sold off the loans to someone else. Like who?

Investors. Giant banks, hedge funds, pension funds, you name it.

What about the fraud done on these investors who bought these loans? Tens of billions, no, hundreds of billions of dollars of these mortgages were packaged as investment grade obligations with the blessing of certain credit agencies such as Fitch, and sold off to investors.

Do you think the State of Florida money market fund that lost several billion dollars of school system money happened for this reason? You betcha. There may be toxic CDOs and other exotic instruments sitting in your own money market fund.

Yesterday MBIA, the huge bond insuror, said they have thirty billion dollars worth of these types of toxic securities in their portfolio. They will in all likelihood require a massive rescue. And let's not forget that the European Central Bank just auctioned off half a trillion dollars

The real fraud was perpetrated by Bear Stearns and Wall Street, not the other way around.

Fortunately, Goldman Sachs succeeded in shorting these mortgages and making many billions. There will be nice Christmas bonuses all around for Goldman Sachs employees this year. I can't say the same for the typical homeowner.

If you are a homeowner in trouble, you may want to just walk away from your situation. Especially if you can't get a new loan, and your house value is falling and perhaps you owe more than your house is worth. Perhaps you feel your mortgage broker lied and used fraud to get your loan.

But please don't just walk away and let things go through foreclosure. There are better ways of handling a house you can't afford.

I developed the Mortgage Relief Formula and I have about 100 articles and a free 25 page report that will help you llower your mortgage payment without getting a new loan, get credit card debt relief without Chapter 13 and much more.