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Posts Tagged ‘taking out equity in mortgages’

More Bank Fraud

Posted by Larry Doyle on January 16th, 2010 12:53 PM |

The bailing out of our largest financial institutions was a violation of moral hazard of the greatest magnitude. With that violation well in place, America is now facing violations of other moral hazards. What do I mean?

The mortgage modification program is a joke because the banks holding the mortgages have no incentive in modifying them. Why? Because, to a very large extent, if the bank modifies the primary mortgage then it has to write off the value of a second lien, if in fact a second lien exists. Given the amount of equity borrowers took out of their homes, there are a lot of second liens outstanding.

How are the banks handling these second liens? Violating a moral hazard and committing fraud in the process. A report from CNBC, Big Banks Accused of Short Sale Fraud, highlights this reality.  The report outlines: (more…)






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