by Calculated Risk on 8/28/2007 05:39:00 PM

From Newsday: Ex-American Home Mortgage manager going to prison

A U.S. District Court in Alaska Monday sentenced a former American Home Mortgage branch manager to serve more than 2 years in prison ... in connection with wire fraud charges after he falsified documentation to secure "stated income" mortgage loans from American Home and Countrywide Financial.
...
In the American Home case, Partow, 41, helped a client refinance his home in 2006. Despite the client having provided accurate information about his income, Partow listed the income as $20,000 per month -- "an amount that significantly overstated [the client's] true income," according to Partow's plea agreement.

In the Countrywide case, he admitted to knowingly overstating an applicant's income to qualify the client for a loan in April 2004.
...
By misstating applicants' financial statuses, Partow enabled them to qualify for loans they might not otherwise have gotten.

Back in March, Tanta pointed out that there are two types of mortgage fraud: “Fraud for Housing” and “Fraud for Profit.”

In this case, it appears the mortgage broker overstated the borrower's income without the borrower's knowledge. So this would be a fraud for profit scheme, and I expect to see many more prosecutions of this type soon. If the borrower had overstated their own income, the borrower would probably not be prosecuted. Prosecuting fraud for housing usually isn't worth the effort, and it is difficult to distinguish between whether the borrower was committing "fraud for housing", or if the borrower was just overly optimistic (i.e. delusional) about the potential income from that side job cutting lawns.

I recommend reading Tanta's piece on mortgage fraud: Unwinding the Fraud for Bubbles