Jail—Mortgage Lenders, brokers, Who Knowingly Sold or Made Fraudulent Home Loans

At this moment, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are trying to get Congress to accept “an unclear and complicated plan” to give 0 billion taxpayer dollars to some of the same banks and investment institutions that brought America to the brink of depression. Millions of Americans are now at risk of losing their jobs, homes, even their future.

How can Americans possibly trust this Congress to protect 0 billion in Taxpayer Dollars that is needed to Restore US credit liquidity from being misappropriated? Consider: the U.S. Government still has no clear explanation how over billion dollars of Iraq Oil Revenues disappeared from its U.S. Government bank account, revenues earmarked for rebuilding Iraq’s infra structure. The U.S. Government allowed hundreds of accounting irregularities to continue until the billion was gone. The disappearance of the $billions was discovered by a charitable organization. For years the U.S. Government did nothing to set up a transparent financial management system to account for Iraq's oil revenues. Since the U.S. occupation, oil tankers and trucks in Iraq have been allowed to ship oil without flow meter monitoring making it impossible for U.S. Government to track or determine how much oil was sold abroad or in Iraq, a heyday for thieves. Oil flow monitoring systems are not complicated and relatively easy to install. Now just imagine this U.S. Congress trying to monitor 0 Billion in “bailout money” left totally to the control of a few government people to pick and choose which private businesses get cash. Does that sound a bit like how Fannie Mae? Determining which companies get government cash handouts could quickly become political as it did in Germany during the 1930’s. Germans business that followed the Nazi line got a lot of help from Hitler. Those that didn’t—or did not pay off the right Nazis, perished.

Trust Congress? Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke appear intended to give part of the 0 billion taxpayer bailout money to some of the same banks and investment institutions that helped cause our current financial crisis.

Unless these U.S. Taxpayer funds are closely monitored and extremely protected, Americans should expect that the same reckless policies and possibly criminals that caused this financial crisis will move quickly to gain access to taxpayers’ bailout money, for example: (1) exploiting lack of U.S. Government oversight to manipulate or control where bailout money is spent—perhaps even bribing government officials to give a particular company or institution “bailout money”; example: (2) exploit current corruption in U.S. government and lack of Government oversight to buy from Government real estate and corporate assets below fair market value that the Government holds in trust during this financial crisis. Example: look what happened to American Indians’ U.s. Government held assets that disappeared; (3) It should be expected some of the same corrupt participants that caused this financial mess will immediately seek employment with new U.S. Government agencies established to dispose of millions of toxic loans and real estate assets the U.S. Government takes over from lending institutions and other entities. Americans must ensure their taxpayer assets are openly marketed and sold at fair market value, that all investors have equal opportunity to buy real estate and other assets being sold by the U.S. Government: that insider sales of assets are prosecuted.

Currently millions of Americans continue to see the value of their homes collapse in value while loans against their property exceed the price a homeowner can sell their property. Declining property values in states like Nevada, Harry Reid’s state, have proven especially damaging to homeowners with “recourse mortgages” because institutional lenders can attach the subsequent income and assets of foreclosed homeowners to recover “lender losses” not recovered by foreclosure. Should it have been foreseeable by some institutional lenders in Nevada and other states their continued writing of sub-prime mortgages in communities experiencing a high rate of loan defaults and foreclosures would further undermine the home values of their previous mortgage borrowers, reduce their previous borrowers’ ability to sell their homes and repay the lender? Perhaps nationally, lenders should be required to disclose to prospective borrowers the current default and foreclosure rate of homes in the neighborhoods a lender is soliciting to make home loans.

Institutional Lenders, brokers and others legally found to have knowingly sold mortgage backed loan securities made in neighborhoods that they or others undermined in real estate value by writing large numbers of sub-prime mortgages and had actual knowledge of a high rate of defaults and foreclosures, should perhaps be arrested for fraud if proper disclosure of those facts was not made to their purchasers of mortgaged back securities. Possibly such business practices by institutional lenders may constitute “standing” for a homeowner class action lawsuit to stop institutional lenders from pursuing collections on “recourse mortgages” in Nevada and might stop lenders raising (ARM) adjustable rate mortgage interest rates nationally.

Is Jail Enough Punishment for lenders, brokers and others if they knowingly sold or facilitated the sale of fraudulent mortgage-backed securities: sold securities they knew were backed by “INFLATED real estate appraisals; had knowledge home loans they were selling to pension funds and other entities were made to un-qualified buyers likely to default, a fact they did not disclose.

The U.S. Justice Department should make a strong effort to forfeit the ill-gotten gains of lenders, their executives, anyone that is criminally or civilly proven to have defrauded home loan borrowers or purchasers of mortgage-backed securities.