SACRAMENTO, Calif. — Investigations into the collapse of financial titans such as Lehman Brothers, Bear Stearns and Washington Mutual have attracted most of the attention in the ongoing unraveling of the nation’s mortgage-backed-security mess.
Lost in the headlines are prosecutions proceeding quietly on the local level against smaller players.
In dozens of jurisdictions around the country, federal prosecutors are charging hundreds of people with originating the bad loans that helped derail the world’s financial markets.
Prosecutors are finding buyers who created fake identities to take out home loans, brokers who paid kickbacks to ensure fraudulent mortgages were approved and lenders who took bribes and forged documents.
They are the ones who fraudulently overstated property values and borrowers’ incomes, who used illegal means to secure loans that homeowners ultimately couldn’t afford, though they had plenty of encouragement from Wall Street.
That fraud helped artificially inflate home values that have since come crashing down. Foreclosures are dragging down property values in neighborhoods across the nation. Lenders, in response, have shut the door on almost anyone without platinum credit and raised a variety of fees to make up for huge losses.
“Let’s not lose sight of the fact that there is immense criminal fraud involved in this financial crisis,” said U.S. Attorney McGregor Scott, whose district spans California’s vast Central Valley and is among those most affected by the housing bust.
