Is That How You Feel? (“The Onion”’s take on subprime mortgages)

Fannie, Freddie Busted

WASHINGTON – The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.

Officials announced that the executives and board of directors of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.

Mortgage Fraud: Should the Lender be Sued by the Borrower?

A mortgage broker submits a fraudulent loan file to a lender, which promptly funds the loan. The borrower – whose identity has been stolen by the mortgage broker – doesn’t even know that he is now the proud owner of an overpriced white elephant, which promptly goes into default.

Sounds familiar? The mortgage broker/realtor/closing agent used the stolen identity of the “buyer” to defraud the lender, and is now being sued by the man whose identity he had stolen. But should the buyer add the lender as a defendant?

The plaintiff’s attorney thought of the lender as a fellow-victim, and was about to suggest to the bank to join the suit as a co-plaintiff, but something which caught his eye made him change his mind: the appraisal.

The appraisal, forged by the mortgage broker, raised more questions that it answered. The comps were all inappropriate and any trained underwriter would have recognized it immediately as a work of fiction. Instead, the lender (one of the largest savings banks in the U.S.), accepted it as is without reviewing it.

The lender’s carelessness helped the mortgage broker pull off the scam. After careful review, the plaintiff’s attorney decided to add the lender to the lawsuit – not as a co-plaintiff, but as a defendant.