ROAD TO RUIN: Mortgage Fraud Scandal Brewing

Criminal fraud may be the most underreported aspect of our current financial crisis. In this "Road to Ruin" report, former subprime lenders from Ameriquest, once the country's largest lender, describe a system rife with fraud. They describe how a "by-any-means-necessary" policy pushed employees to cut corners and falsify documents on bad mortgages and then sell the toxic assets to Wall Street banks eager to make fast profits.

Category:

News & Politics

Tags:

• Mortgage fraud
• citigroup
• bailout
• foreclosure
• Obama
• financial crisis
• Ameriquest
• Argent
• subprime lenders
• subprime
• Wayne Lee
• Roland Arnall
• predatory lending

[Beingreal40]

Full confession. Homeowners brought taxes and bank statements to proffesionals to guide them. Too much to learn and consider when your new to buying while being pushed to close a 45 day escrow buy a wicked realestate agent.. Last thing on your mind is to be part of a scam.

90+% never had intentions of buying more than they could afford. They were told they could.

[toeg1]

Beautiful and poignant. The Strawman that honest daily workers are at fault is killed once and for all. Job well done. But I still feel very sad for those who were suckered into all this and who lost everything while the fat cats on Wall Street dined on their crime.

[5147848amp]

@mandelman

Dude, man. Thanks for putting up with my beginner status. Untangling all of this stuff - all of the lingo alone - is causing brain pain. I've read through your response once. Another few times and it'll start to sink in! (You've got your own special folder on my desktop!) Anyhow, once again, gurt thanks for the reply. Here's to the end of the bankster occupation!

[mandelman]

@5147848amp Continued...

10. Last one... When countries get into financial trouble, they have 3 options: 1. Devalue currency, but Greece can't because it's part of the Euro. 2. Slash interest rates, but Greece can't because rates are set by the EU Central Bank. 3. Print money and buy up debt, but Greece can't do this alone because of the Euro again. 4. A Bailout... that's where we are today. OR... Greece leaves the EU, defaults on its debt, and tells bankers to go fly a kite. Hope it helped...

[mandelman]

@5147848amp Continued...

9. In the case of Greece... Goldman Sachs helped Greece borrow, which countries do by selling bonds that comprise the National Debt. Interest payments on that debt can get quite large, and countries often have to sell more bonds to pay the interest payments. Goldman helped Greece right into the poor house and as the country's credit rating fell, it was forced to pay higher interest rates to sell more bonds... until it was in a death spiral.

[mandelman]

@5147848amp Continued...

8. With no market for mortgage-backed securities, there was no secondary mortgage market, and then no mortgages, so housing prices went into a free fall... and foreclosures increased, which caused housing prices to fall further, which lowered spending, which made unemployment rise... which increased foreclosures. We entered a downward spiral, and we're still in it today. The only lending going on today as far as mortgages are concerned comes from the government.

[mandelman]

@5147848amp Continued...

7. By the summer of 2006, Greenspan has raised interest rates 17 times in a row in an effort to cool off the heated real estate market and the adjustable and teaser rate loans jumped up, and foreclosures started in the third quarter of 2006 as a result. By July of 07, S&P and Moody's, two credit ratings agencies that rate bonds, downgraded the ratings on 1,032 bonds and investors panicked because they no longer trusted the AAA and BBB ratings. Everything froze.

[mandelman]

@5147848amp Continued...

6. One type of derivative is called a "collateralized debt obligation," or CDO. Think of a CDO as a tower of BBB rated middle slices of mortgage-backed securities. Another was called a CDO squared, which was a CDO with even more leverage or borrowing employed. The banksters sold these type of investments all over the world to pension funds, European banks and sovereign wealth funds, which are a country's investment funds.

[mandelman]

@5147848amp Continued.

5. The banksters created derivatives out of mortgage-backed securities. Derivatives are securities whose values are "derived" from other securities. Mortgage-backed securities were divided into "tranches," which is just French for "slices." The top slice was rated AAA, meaning it was supposed to be safe, but paid the least amount of interest. The middle tranche was rated BBB, so it paid more interest, but was riskier. And the bottom slice paid the most, at the most risk.

[mandelman]

Respond to this video... Continued...

4. Wall Street's bankers would like us to believe that it was the "irresponsible borrowers" who are responsible for the crisis. It is nonsense. The bankers caused the crisis in every sense of the word. Imagine one loan for $100,000 being the collateral for $4 million in leverage. When the $100,000 loan defaults, it's not the $100,000 that matters it's the $4 million.

[mandelman]

@5147848amp Continued...

3. As long as things went up no problem, but when things went down their leverage wiped them out. Imagine investing $10 and earning 10%. You'd have $11. Now imagine investing $10, but also borrowing $90 so you invest $100. If you made 10% you'd have $110, and after you re-paid the $90, you'd make an additional $10, which means you doubled your money. But if you LOST 10%, you'd lose $10, and be wiped out, because you only had ten bucks to begin with. That's leverage!

[mandelman]

@5147848amp Continued...

2. BUT... the global financial crisis WAS NOT CAUSED BY BAD LOANS. The meltdown in the fall of 2008, was not a function of bad loans, it was the leveraged securities that blew up Wall Street's investment banks. Inside a mortgage-backed security, you might find 5-10% actual loans, and 90-95% leveraged securities. Leverage is "borrowing". Wall Street's bankers borrowed against the securities they created in order to amplify their returns.