The mortgage process used in the early 2000′s left room for a great deal of mischief. Some of the consequences of those actions are falling on the actors now. From borrowers to brokers to lenders to banks to investment institutions, there were plenty of bad actions to go around.
The US Department of Justice (a client of my company, AFX LLC) announced a sweeping investigation into the mortgage securitization process. “For the first time since the crisis, federal investigators will be joined by state law enforcement officials as part of a working group that, New York Attorney General Eric Schneiderman said, would launch the “broadest, deepest investigation into what blew up the economy” as reported by USA Today. “The U.S. government dispatched 55 prosecutors, FBI agents and analysts Friday to a new financial crimes enforcement unit focusing on home mortgage abuses that fueled the 2008 economic collapse.” US Attorney general Eric Holder said the new effort will 
involve a new collaboration of federal and state officials with collective authority to investigate abuses in all aspects of the financial services industry, including the packaging, selling and valuing of residential mortgage-backed securities.
At the other end of the spectrum is the foreclosure defense industry. Many legitimate firms and attorneys work with borrowers to help fight off overly zealous lenders. Some defenders prey upon desperate homeowners extracting fees for litle or no subsequent effort. A recent prosecution in Texas describes one alleged example. This scheme involved the use of unrelated bankruptcy cases to delay foreclosures. Since bankruptcy automatically puts a hold on any action against the debtor, properties in distress were signed over to an unrelated person already in bankruptcy to use that ongoing process to stay the foreclosure. In theory it is a creative idea. In reality it resulted in the person behind this idea Frederic Alan Gladle to plead guilty to felony fraud.
“From 2007 until his arrest in October, Gladle operated a business that helped distressed property owners delay foreclosure by paying a monthly fee — usually about $750 a month, according to prosecutors and charging documents. After clients signed up for his services, one of Gladle’s salespeople had them sign deeds transferring a fractional share — usually one one-hundredth — of their distressed property, the documents said. The shares were transferred to an unrelated person who had previously filed a bankruptcy petition in court, the documents said. Those people were unaware that Gladle was using their names, which were obtained from online court records, the documents said. Gladle, or “a co-schemer operating at his direction,” would then send a copy of the fractional deed and a copy of the unrelated person’s bankruptcy petition to the lender that was expected to foreclose, the documents said. Because bankruptcy proceedings automatically delay foreclosure actions, the lender would not be able to immediately foreclose on Gladle’s client’s property, the documents said.”
