Beat Home Foreclosure

Legal Remedy For Mortgage Fraud

The following video presents a mortgage fraud lawsuit template that is available in the Tools for Justice Document Library, which seeks proper legal remedy for the homeowners who received a mortgage with an inflated appraisal during the Housing Bubble. Unscrupulous mortgage lenders and their mortgage brokers defrauded homeowners in their mortgages by (1) routinely pressuring appraisers to “meet the numbers in the loan docs” or be blacklisted; (2) misrepresenting and overstating the value of the property; and (3) misrepresenting and understating the loan-to-fair-market-value ratio; all of which constitutes fraud in the inducement.


The following is a brief synopsis explaining:

  • Why mortgage borrowers have legitimate grounds for filing civil racketeering complaints against the national mortgage banking institutions and their subsidiaries that created and collapsed the Housing Bubble;
  • Why mortgage borrowers are entitled to triple civil damages for mortgage fraud and fraud in the inducement; and
  • Why filing a civil RICO complaint for mortgage fraud and seeking civil damages for fraud in the inducement is a more realistic approach to foreclosure prevention than conventional foreclosure defense, as well as being a real remedy that actually addresses the root cause of the problem.

The forerunner of the current mortgage banking and foreclosure crisis is the savings and loan crisis of the late 1980’s and early 1990’s, wherein about 747 out of 3,234 savings and loan financial institutions failed, and over one thousand financial officers were convicted of felonies. According to the former bank regulator in the Reagan Administration and white-collar criminologist, William K. Black, the present crisis is seventy times larger, yet none of the top financial officers who are responsible have been prosecuted.

During the savings and loan crisis, a new business model emerged within the sphere of unscrupulous business practices, called “looting”. Looting is where corporate executives bankrupt their own corporations for personal gain. The primary tool that corporate executives use for looting is called “accounting control fraud”.

The essential elements of accounting control fraud within the mortgage banking sector are: (1) grow like crazy; (2) make preposterously bad loans; (3) have extreme leverage, i.e. borrow extensively to create enormous debt; and (4) put aside only ridiculously low allowances for future losses. This formula produces extremely high, although fictional, profits in the short term. The senior executives become very wealthy just before their corporations fail, and they go on to either a very confortable retirement or to another lucrative position in another company.

In the middle 1990’s, the top financial officers of the federally chartered banks observed enormous pools of investor funds containing trillions of dollars, which were made up primarily of individual retirement accounts. These banking executives wanted this money for themselves.

Conspiring together, these financial officers devised a scheme using mortgage-backed securities as a vehicle to defraud institutional investors out of their funds. The bankers also wanted to avoid being caught. So this time around, they planned ahead to make sure that there would be no prosecutions or convictions.

Their plan included achieving the repeal of substantially all of the consumer protections of the Banking Act of 1933, by bribing politicians in Washington D.C., and infiltrating the federal government by placing former banking executives into strategic regulatory positions in the SEC and other key regulatory offices to create a mortgage lending and securitization environment where the federal banks are substantially self-regulating, and accountable to no one.

In order to “grow like crazy”, these mortgage banking institutions needed to make large numbers of loans, and in relatively high dollar amounts. They conducted massive marketing campaigns offering easy credit to consumers, together with instigating the inflation of property appraisals in order to create the illusion of steadily raising property values and the false belief that real estate had become a safe investment offering a decent rate of return, resulting in a rush by consumers to divert their savings into to purchasing property. The bankers then bundled their inflated mortgage loans by the thousands to obtain bogus AAA rated mortgage bonds, which they sold to institutional investors in exchange for a handsome profit.

Beginning in 1998, federal banking institutions began causing the inflation of real property appraisals on a nationwide scale by using these banks’ own appraisal management companies to inflate appraisals, together with maintaining a policy of black-listing any independent appraiser that did not “meet the numbers” on the loan documents. This unethical and illegal policy effectively put independent appraisers out of work if they did not cooperate with the lending underwriters.

These banks used their own appraisal management companies to instigate 10% per year average inflation of property appraisals nationwide starting in 1998 and reaching its peak at the end of 2006, to achieve nearly two hundred percent average inflation of real property appraisals. The overall appraisal inflation took nine years to reach its peak at the end 2006, and will probably not fully subside back to the true property values found in the beginning of 1998, until about 2013.

The racketeering activity involving appraisal inflation instigated by the bankers, and conducted by their appraisal management companies, constitutes felony crimes in violation of both federal and state RICO statutes.

These federal banking institutions have, by instigating the inflation of real property appraisals to a significant degree nationwide, directly and proximately caused small business owners and home mortgage borrowers all over the country to be injured in their business or property because they (1) overpaid for their house; (2) they would not have entered into the purchase at the contract price if a proper appraisal had been prepared; (3) they overpaid principle and interest; and (4) have in certain cases suffered foreclosure.

With fraud in the inducement, we have a choice of remedy: We can rescind the contract; or we can affirm the fraud and sue in tort for damages. Rescission of contract is no remedy when we owe more on the balance of the loan than what our property is worth, so we choose to affirm the fraudulent mortgage contract and then sue in tort, which means civil wrong, for our damages arising out of the fraud.

Once you understand how to get remedy, and decide to take action, you become empowered to solve your foreclosure problem. As an added bonus, you can ask the trial jury to instruct the judge to order the defendants remanded to the proper authorities for criminal prosecution.

If you are a victim of mortgage fraud involving an inflated appraisal, then you may want to learn how to obtain triple damages for fraud in the inducement by filing your own civil RICO complaint against the federal banking institutions that have damaged you.

Our federal civil RICO complaint template for mortgage fraud and fraud in the inducement is available to subscribers to our Tools for Justice Document Library.


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