In these two posts, Part 1 and Part 2, Bill Black mops the floor with American Banker columnist Andrew Kahr. In his column, Kahr had suggested that mortgage applicants be prosecuted to the full extent of the law including fines up to $1 million and up to 30 years in prison, if they gave false information in a mortgage application. Kahr is suggesting that banks comb their files and make criminal referrals to the U.S. Attorney in their jurisdiction.
Laws against bank fraud are of course necessary and appropriate. However, Black makes an amazing case that what has happened in general is widespread fraud by predatory lenders. He uses Kahr’s own words to convict him.
I find it incredible that with an abysmal record in regard to home mortgage origination, securitization, servicing, and foreclosure, a financial industry representative would recommend severe sanctions for clients. Yes, there are some who did intentionally commit fraud. But what is good for the goose is good for the gander. The U.S. Attorneys should start by prosecuting the fraudsters in the industry who knew what they were doing and did it for personal gain. Only then might there be some hope of an honest banking industry.