The big, and little, mortgage-fraud news

By Felix Salmon
May 17, 2011
Shahien Nasiripour had a very important scoop yesterday -- a set of confidential federal audits has found a pattern of mortgage fraud at the nation’s five largest mortgage companies.

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Shahien Nasiripour had a very important scoop yesterday — a set of confidential federal audits has found a pattern of mortgage fraud at the nation’s five largest mortgage companies. The victim? Uncle Sam. The findings have been passed to the Justice department, which could prosecute the banks under the False Claims Act, which Shahien describes as “a Civil War-era law crafted as a weapon against firms that swindle the government”.

Shahien also brings us up to speed on where negotiations are with between the banks and the federal government:

The five giant mortgage servicers, which collectively handle about three of every five home loans, offered during a contentious round of negotiations last Tuesday to pay $5 billion to set up a fund to help distressed borrowers and settle the allegations.

That offer — also floated by the Office of the Comptroller of the Currency in February — was deemed much too low by state and federal officials. Associate U.S. Attorney General Tom Perrelli, who has been leading the talks, last week threatened to show the banks the confidential audits so the firms knew the government side was not “playing around,” one official involved in the negotiations said. He ultimately did not follow through, persuaded that the reports ought to remain confidential, sources said.

This is big news, so it’s hardly a surprise to see the mortgage-fraud story splashed across the front page of today’s NYT. Except, Gretchen Morgenson’s piece barely mentions the federal investigation. Instead, she concentrates on a much less important piece of news: that New York AG Eric Schneiderman has started asking much the same questions of Wall Street banks that his predecessor Andrew Cuomo was asking earlier on in the financial crisis. Morgenson also fails to talk about the one possible reason the story might be important: that it could mark a break between Schneiderman and the other AGs, and thereby derail that settlement.

And to make matters worse, the NYT put a stunningly stupid headline on the story: “New York Investigates Banks’ Role in Fiscal Crisis”. What fiscal crisis? New York State’s? The US fiscal crisis? Is there even a fiscal crisis? The NYT doesn’t say — because in fact the story has nothing to do with any fiscal crisis at all. What the paper means is the financial crisis, or just the crisis, but presumably on the grounds that “financial” didn’t fit, some front-page editor decided that “fiscal” was a synonym. Which of course it isn’t.

It’s depressing to see the NYT and the WSJ give much bigger play to a small story hand-delivered to them by Schneiderman’s office than they do to the important story broken by HuffPo, which they completely ignore. It’s the downside of journalistic competitiveness: if someone else got the story first, the NYT and WSJ aren’t interested in it, no matter how newsworthy it might be. And of course they also probably have a strong desire to refuse to admit that HuffPo ever beats them on anything.

But Morgenson’s story appears right below the famous box saying “All the News That’s Fit to Print”. There’s news out there, broken by HuffPo, which is more than fit to print. And then there’s Morgenson’s story, all of which, after the first three paragraphs, is a rehashing of stuff we already know. If the NYT really wanted to do the best by its readers, it would tell them about the big news, as well as Morgenson’s non-exclusive scooplet.

Update: After this post appeared, the NYT changed its headline from “Fiscal” to “Financial”.

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Comments
5 comments so far

Are we sure fiscal won’t work for financial… seems like Merriam-Webster thinks it would fit.

http://www.merriam-webster.com/dictionar y/fiscal

Posted by TraderWRB | Report as abusive

Why does American Home Mortgage Servicing Inc. keep slipping through the cracks after bankrupt American Home Mortgage has already been charged, sued, and settled for defrauding the loans.

Posted by GetRealsoon | Report as abusive

Because @trader, the fiscal crisis of taxation, spending and inflation is quite different from the financial crisis.

The ‘financial’ crisis occurred once the bubble broke in 2008 and was declared as such all over the world… as in ‘Global Financial crisis.’ (although also declared over by most economists who use too many charts and not enough common sense)

It isn’t just semantics. The media has to stay abreast and use the proper headlines and labels to be informative.

Look how the banking crisis was declared over so that bonuses could flow once again! The banks problems were glossed over and whitewashed, but the banking crisis was far from over (as this story also shows)

Banking crisis over
http://www.time.com/time/business/articl e/0,8599,1890560,00.html

People who aren’t in an area where foreclosures are rampant and who think foreclosures are simply because some dolt is a deadbeat (such as those giving us this ‘news’ in the NYT) don’t have a clue and sincerely do not give a crap enough to remain up to date (if they ever were…)

I am glad you haven’t given up on these stories Felix (although you have fallen behind as well)

Posted by hsvkitty | Report as abusive

$5B is chump change compared to the total asset value of resetting or subprime mortgages over the past 3 years. The big 5 are trying to get away with stealing.

Posted by GRRR | Report as abusive

Either Huffpo or the NYT lifted part of a story from the other last night. In the oh-so-important story about Schwarzenegger and Shriver, the following paragraph appears on both websites:

“Shriver, 55, maintained her own identity when her husband entered politics, though she gave up her job at NBC. Their union was often tested in Sacramento, where the former action star contended with seven years of legislative gridlock, a budget crisis and lingering questions about his fidelity.”

http://www.nytimes.com/aponline/2011/05/ 17/arts/AP-US-Schwarzenegger-Shriver-Sep aration.html?_r=2&pagewanted=2&hp

http://www.huffingtonpost.com/2011/05/17  /arnold-schwarzenegger-fathered_n_86286 7.html

The NYT article is one long piece but the Huffpo blogger broke up the same information into several different stories. Whoever lifted that paragraph did manage to rewrite the rest of the story in their own words.

The children tweeting:
http://www.huffingtonpost.com/2011/05/17  /arnold-schwarzenegger-lov_n_863289.htm l

Maria Shriver responds:
http://www.huffingtonpost.com/2011/05/17  /maria-shriver-responds-to_n_863098.htm l

Posted by coralinemae | Report as abusive
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