Friday, May 29, 2009

FBI Makes Mortgage Fraud Arrests, Three Years Too Late

Apologies in advance for the rant. If you're looking for something a little more sober, check out this state worker salary post.

In another example of closing the barn door long after the horse had fled, the FBI arrested an Elk Grove police officer on several counts of mortgage fraud. Turns out, the only thing extraordinary about the case is who the accused fraudster works for:

An Elk Grove police officer allegedly lied on his mortgage and refinance applications to obtain loans with cash-equity totaling tens of thousands of dollars, according to an affidavit in Sacramento's federal court...

Ali Khalil refinanced each of the properties twice within months of the original closings. In each of the four transactions, he would list each property as his only and primary residence, the affidavit states.

He also inflated his income, saying that he earned twice his actual salary, the affidavit states.

Authorities said his false statements "made qualifying for the refinancing easier, and was material to the bank in approving the loan application."
Here are the not-so-juicy loan details:


I'm sorry, but where was the FBI in 2006, 2007, and 2008? Also, while it's easy to lie on a mortgage application, it's just as easy for the bank to verify income. (Tax return, anyone?) Far be it for me to set the FBI's priorities, but what do they hope to accomplish through this prosecution? Maybe they didn't get the news, but the bad guys won! There's even a guy that flaunted his crimes on the internet for years, stole millions, and has yet to be prosecuted. For every Khalil that gets the book thrown at him, there are thousands of equally guilty people that will escape punishment.

Perhaps the FBI should focus on the financial firms that lied to investors and stole billions, rather than some pathetic wanna be "investor" (who happens to be a cop) that lost it all.

9 comments :

Bryan said...

They say that Lady Justice is blind. I guess she's also a little slow. Definitely a handicap sticker candidate.

siflsockpuppet said...

I just closed escrow a week ago on a house in Elk Grove using an FHA loan. You would not believe the huge amount of paperwork the underwriters forced me to produce! It was ridiculous! Though this is better for them - and the taxpayers - than loaning money to anyone who could grunt and sign their names...

Max said...

Though this is better for them - and the taxpayers - than loaning money to anyone who could grunt and sign their names...This is actually a return to normalcy. :) It's so easy to avoid fraud when due-diligence is used.

Anonymous said...

Funny, I thought of Casey when I read the article this morning. I kept thinking, WTF, I know of a guy right here who did it at least SEVEN times!!! Maybe they went after him because of his job, but I don't understand.

It's a start anyway, we can only hope they'll move up the food change going forward.

Anonymous said...

Oh, forgot something. Where the heck is agent bubble anyway?

Max said...

Where the heck is agent bubble anyway?He's still around, just very busy. Blogging is a harsh mistress sometimes. :)

Anonymous said...

"..it's just as easy for the bank to verify income. (Tax return, anyone?)"

Or even a 4506-T form. One signature and a bank can verify up to five years of returns without the borrower even submitting returns to the bank.

"You would not believe the huge amount of paperwork the underwriters forced me to produce! It was ridiculous!"

What is a huge amount of paperwork?? Three years of tax returns, W2's, bank statements....
Any halfway organized person should be able to generate those in a matter of minutes.

Wadin' In said...

You can not blame this mortgage fraud phenomenon only on the FBI. The whole process was broken and everyone participated: Realtors, mortgage bankers, borrowers, lenders, wall street bond houses, investment advisors, regulators, etc.

I sent examples of mortgage fraud to four agencies in May 2006: DRE, State Office of Appraisers, Attorney General and the FBI. The only one that responded was the appraisal office and they shrugged it off. Eventually, the FBI took up the cases after I went to their office on Orange Grove Ave, presented a thick document and went on a 15 minute rant. The bottom line is they are starting to win some battles, but ironically, their job is to solve crimes AFTER they are committed.

I suggested to the FBI they create a phone bank to call all the Sacramento realtors and mortgage bankers, identifying themselves as with the FBI office and start asking general questions about mortgage fraud. That would provide pause for the 98% of the honest people in the industry, keeping them from getting caught up in the shady actions. Of course it was dismissed, since the FBI is not involved “in babysitting the industry”.

There are some very easy answers to all these problems: 1) loan originators must share in the loan risk, 2) appraisers must be assigned from blind pools, so their values to not determined if they get the next job, 3) every transactions must record the realtor, the appraiser, the lender, and the borrower, so a data base of suspected transactions can be easily identified and participants blackballed from access to the industry, and most importantly 4) all loan qualifying must be done only from income reported on tax returns! Imagine all the tax cheaters out there who might start reporting income if that was the only way to buy a house. You get two birds with one stone!

Anonymous said...

When big finanacial institutions ripped off millions of hard working consumers, when many real estate companies and agents lied to home buyers, where the hell was FBI? Why could not the banks further verify these small folks income? Many fell victim of such a beuracratic mess and this is why we have millions of foreclosures...have FBI go and investigate more similar cases and I am sure they will more case (absurd) than they can handle. Close this stupid chapter and leave these small guys alone.