Why did the Fed Refuse to Heed Warnings About Fraudulent Mortgage Lenders?

[xchrom]

http://www.alternet.org/economy/fedearl-reserve-and-mortgage-crisis



***SNIP

The Appraisers’ Warning of the Lenders’ Fraud Epidemic

A very large number of appraisers have tried to combat home lenders and their agents who were deliberately extorting them to inflate appraisals. When cheaters prosper, the markets drive honest firms and professionals out of business, something economists call "Gresham's dynamic." Honest appraisers tried to block this dynamic:

“From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18).

***SNIP

The FBI’s Warnings of the Fraud Epidemic and the Financial Crisis it Would Create

In September 2004, Chris Swecker, the FBI official charged with responsibility for mortgage fraud, began warning publicly that an “epidemic” of mortgage fraud was developing. Swecker predicted that it would cause a financial “crisis” if it were not contained.

Representatives of the Borrowers Warned the Fed about Endemic Mortgage Fraud

I will make this topic the subject of an entire article. My conclusion from reading the transcripts of several hearings on mortgage abuses that Congress mandated the Fed to conduct is that representatives of nonprime borrowers overwhelmingly opposed the loans, typically explaining that they were frequently fraudulent and predatory. ACORN was one of these groups warning the fed about nonprime loans.

[trumad]

1. I got appraised in 2007---620,000

I'd be lucky to get 350,000 today.

It was insane back then.

[datasuspect]

2. because we live in a banana republic

where bribery of public officials is out in the open and expected if you want anything to get done?

[marmar]

3. k/r