Financial fraud in the mortgage market 5.

Catherine Austin Fitts talks about it in 2004.
HUD did not just fire Hamilton, it also abolished the defaulted loan sales program in 1997 that Hamilton had so successfully created and run for it. The result was predictable, as the recovery rate on defaulted loans fell back to where it had been before Hamilton's loan sales program. This did not stop HUD from continuing to use the higher recovery rate under the old loan sales program run by Hamilton as the basis for calculating the loan loss reserves for new loan origination and insurance volume. This allowed HUD to greatly expand the volume of its loan and insurance business. So great was this expansion, in fact, that even at the time some observers worried that there was not a big enough market to absorb the new loans.

Now if, for the sake of example we assume that the recovery rate under Hamilton was 75% on every $100 million and that volumes were doubled thereafter while the recovery rate fell to 30% then the losses to the taxpayer would rise from $25 million to $140 million. Sadly, this is the sort of loss rate that HUD must in fact be experiencing on a portfolio worth billions. You may well ask yourself how something like this could be allowed to happen, that surely someone in government would blow the whistle.

This is a reasonable question, and it has an equally reasonable answer. The fact is that they don't blow the whistle because they either do not know or do not want to. Susan Gaffney, HUD Inspector General, when questioned about the loan sales recovery and loss rates, flatly stated that she did not know and did not see why she should know. The IG, mind you, is the internal audit and control officer of HUD. This is reminiscent of a similar complicity at the Pentagon's IG office, which in the spring and summer of 2001 was under congressional investigation for the fraudulent issuance of credit cards to phantom employees. This investigation died in the explosions on the 11th of September that year, as did so many people.

http://www.financialsense.com/Experts/2004/AustinFitts.html
http://www.scoop.co.nz/stories/HL0310/S00223.htm

Category:

News & Politics

Tags:

• Fannie
• Mae
• Freddie
• Mac
• HUD
• Barnenke
• Paulson
• Bush

[cds162]

yes buy gold & silver... in the next couple of years you will be glad you did

[foolmetwicethemovie]

Thanks for posting