Why Our Industry Is Where It Is

The mastermind behind the fraud, HUD and the Justice Dept. claim, is Mike Ashley.The DOJ claims Ashley fostered an environment that encouraged Lend America sales staff to originate FHA loans, even when borrowers were not eligible.Sales staff could make 10 times the commission on FHA loans than on standard mortgages and almost four times the commission than a subprime mortgage.The suit further claims Ashley’s employment agreement required he be paid equivalent to one-half of a percentage point of the principal of every mortgage Lend America originated. Lend America originated nearly $1.1bn in loans in the financial year ending September 30, 2008. Accordingly, Ashley was entitled to nearly $5.4m in compensation during the year. In the suit, Justice claims this arrangement is a violation of HUD regulations.The suit claims Lend America also created a slush fund of cash to fund delinquent mortgages for borrowers to conceal their inability to keep up with payments during the first two years of the loan, the period of time that HUD monitors its Direct Endorsers’ delinquency and default rates.According to the Justice Department lawsuit, Ashley’s worked in a number of positions at mortgage firms, and by his own admission, committed his first act of mortgage fraud in 1989.

I am in no way justifying Ashley’s actions; however I see two faults here. Instead of penalizing the rest of the honest mortgage industry with ridiculous hoops and impossible regulations just take some time to enforce the current laws you have. If Ashley was in jail his fraudulent activity would’ve ceased in 1989 sparing millions if not billions in now default loan investments.