Mortgage Fraud Hurts Everyone

Written By: Glenn Michaels, Op-Ed Writer

I have testified at several mortgage fraud trials at the request of the federal government due to receiving subpoenas to appear in court as an expert witness for the government.

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The one thing I have learned is that no one has enough money and time to fight the government. One of the trials that I testified at was held in Chicago, IL. The government flew me out to Chicago from New York, paid for all my expenses and I was at the “W” in Chicago. The government also flew witnesses from Los Angeles, CA, and Minneapolis, MN to appear against a mortgage loan processor and branch manager.

The charges against the mortgage processor and branch manager were mortgage fraud, wire fraud, and mail fraud. The branch manager put through his own application for a home loan and submitted tax returns that were not genuine. The mortgage processor who should have known better pushed the loan and sent the loan file to several institutional investors for underwriting. All of the underwriters approved the tax returns and the file subject to an executed IRS form 4506 – T.

This branch manager was an employee of mine and I knew what I was compensating the branch manager and what I was compensating the mortgage processor. The tax return income and the corresponding W-2’s were significantly inflated in order to obtain a loan approval. The pay stubs in the file were also inflated. The pay stubs also contained an incorrect calculation of the Social Security and Medicare deductions. The branch manager and mortgage loan processor both thought they were smart and thought they were going to get away with this fraudulent mortgage transaction.

When I testified I was asked why I did not accept the tax return as submitted. My response was an easy one. “I knew what I was paying the branch manager and the tax return had an incorrect amount of income reported.” In addition, I also stated that the pay stubs in the file was also incorrect.

When checking pay stubs there are two common deductions, social security deductions and Medicare deductions. Every wage earner has social security deduction of 6.20% and Medicare of 1.45%, (7.65%) The calculated numbers on the pay stub was incorrect as social security has a limit and the withholding continued beyond the limit. That’s right; social security withholding has a limit for each and every year. The person who prepared the pay stub went over the limit and continued to deduct the social security withholding.

At the trial the branch manager took a plea deal as he saw the hand writing on the wall that the file was not genuine and he received a nine (9) month prison sentence. The mortgage processor fought the government and eventually lost the case. The mortgage processor received an eighteen (18) month prison sentence for all three (3) charges.

The institutional investor had a non – performing loan and made the originating lender to repurchase the loan file. The neighborhood where the property was situated had a foreclosure and a boarded up property.

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No one benefited from this mortgage fraud, Mortgage fraud hurts everyone.

About The Author

Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 


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