Will Predatory Mortgage Brokers be charged with Money Laundering?
25 August 2007
The sub-prime mortgage scandal is certain to result in casualties in the financial services industry, and the nation’s largest mortgage lenders could be amongst those charged. Remember how it works in our justice system: any entity involved in financial crime is often also “loaded up” with ancillary counts, not the least of which is Money Laundering. This encourages the defendant to enter into a plea agreement to save its skin, and often its soul. Does this sound like the kind of high-risk client you wish to be linked to?
The predatory mortgage brokers and lenders have been accused of:
- Directing borrowers with poor credit scores to high-cost, even unfavourable, loans, which brought in higher commissions for mortgage brokers, clearly excessive fees to service providers, and bonuses.
- Ignoring borrowers’ savings balances, and pushing borrowers towards more expensive loans with less down payments that were profit centers for the mortgage institutions.
- Giving sub-prime borrowers adjustable-rate mortgages with low initial interest charges that quickly mushroomed to double digits.
- Making sure that the clients obtained mortgages with pre-payment penalties so high that refinancing was too expensive to consider in most cases.
- Approving loans with zero money down, and loans that did not require verification of the borrower’s income.