Friday, March 25, 2011

Liar Loan Prosecution

by Calculated Risk on 3/25/2011 09:38:00 PM

Joe Nocera at the NY Times has a strange tale: In Prison for Taking a Liar Loan

Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?

No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.
This sounds more like "fraud for housing" than "fraud for profit" - although from Nocera's description, it doesn't sound much like fraud at all (and the reasons Engle was investigated are bizarre). Read the story ... but it is actually rare for the government to prosecute "fraud for housing" cases. Why this one?

Also this story prompted me to reread Tanta's brilliant piece: Unwinding the Fraud for Bubbles