Will irresponsible lending practices and in some instances, fraud end up being the cause for an overall problem in the credit industry?
In case you haven’t noticed, there seems to be a lot of homes up for sale. I’m even starting to see signs stating that the house in question is being sold by the bank.
We are even seeing signs that the problem might be worse than expected within the credit industry.
Reuters (courstesy of CNBC) is reporting:
Total losses stemming from writing down the value of mortgage-linked securities could be as high as $200 billion, with financial institutions sitting on at least $60 billion in losses that have not yet been disclosed, JPMorgan said Monday.
Banks and insurers, including Merrill Lynch, Ambac Financial Group and MBIA have reported third-quarter losses as they write down the value of securities, including collateralized debt obligations, or CDOs, backed by residential mortgages.
There is much more to come, JPMorgan analyst Chistopher Flanagan said on a conference call with clients.
In a different story, it was also announced that the CEO of Citibank is stepping down because of losses incurred by sub prime mortgages.
In a statement Sunday night, Prince said â€œit is my judgment that given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive officer is to step down. This is what I advised the board.â€
Of course, Mr. Prince doesn’t have anything to worry about personally. There are now reports surfacing that he could walk away from Citibank with $31 million in his pocket.
I could go on and on about the irresponsible lending practices that lured people into buying homes they could ill afford. Hidden in all the irresponsible lending practices is a fair amount of fraud.
Instances of mortgage fraud seemed to rise during the boom in the real estate market. The best resource (I know of) that addresses mortgage fraud is the Mortgage Fraud Blog authored by Rachel Dollar, who is an attorney specializing in the field.
If you are interested in the amount of fraud seen in the mortgage industry, the Mortgage Fraud Blog is an excellent resource.
Fraud associated with mortgages is unlikely to go down anytime soon. We will probably see a lot of fraudulent schemes pop up luring people with the promise of getting out of their personal mortgage crisis.
If anyone is interested, the Mortgage Bankers Association has a pretty decent consumer protection site (stopmortgagefraud.com) to educate the public on this type of fraud, here.
Reuters story (courtesy of CNBC), here.
Forbes story, here.