Whistleblower: Wall Street Has Engaged in Widespread Manipulation of Mortgage Funds

By Heather Vogell : Propublica – excerpt

Securities that contain loans for properties like hotels and office buildings have inflated profits, the whistleblower claims. As the pandemic hammers the economy, that could increase the chances of another mortgage collapse.

Among the toxic contributors to the financial crisis of 2008, few caused as much havoc as mortgages with dodgy numbers and inflated values. Huge quantities of them were assembled into securities that crashed and burned, damaging homeowners and investors alike. Afterward, reforms were promised. Never again, regulators vowed, would real estate financiers be able to fudge numbers and threaten the entire economy.

Twelve years later, there’s evidence something similar is happening again.

Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank — as well as other lenders have engaged in a systematic fraud that allowed them to award borrowers bigger loans than were supported by their true financials, according to a previously unreported whistleblower complaint submitted to the Securities and Exchange Commission last year…(more)

Please read the entire article if you can. The author covers a lot of details and concerns with inflated asset valuations and cash flows that are intentionally hidden from investors and lenders, although some lenders seem to be aware of the ruse, and may have helped orchestrate it. Who will ultimately benefit from the fraud and who will suffer from it?

“…many properties changed their names, and even their addresses, from one CMBS to another. That made it harder to recognize a specific property and compare its financial details in two filings.” Public advocates are finding similar confusion in documents filed in local planning and building departments and agencies.

We see many problems stemming from falsification of documents and facts that will make the economic crisis worse and more widespread. The problems are obvious. We need solutions.

Where are the wise economists who are going to get us through this economic crisis and property devaluation without massive disruption of a shaky rental market composed of a lot of poor and unemployed citizens? Where do you start?