Paraphrasing economist Bill Black: Flagstar was a big mortgage lender that lent among the riskiest kinds of mortgages and was a major user of liar's loans. These were the pervasively fraudulent loans that were insured by an insurance company that specialized in guaranteeing the quality of these kinds of loans, once they were packaged. They bank covered its fraud by making the home buyer appear to be the liar. The real significance of this case is that the same methodology is being used in an enormously bigger case against the Bank of America ...which would be wiped out if it is found guilty.

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February 11, 2013

Judge Rules Against a Bank - Precedent Could Cost Bank of America Billions

Bill Black: Judge rules that Flagstar, a big mortgage lender that gave "liars loans", is liable to insurance company - same issues at stake in Bank of America case
Watch full multipart The Black Financial and Fraud Report


Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.