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Editor’s Note: The following commentary is provided by Larry Rubinoff, branch manager of a Clearwater Beach, Florida office of Mortgage Lending Direct, a dba of MLD Mortgage, Inc. Mr. Rubinoff’s opinions are his and his alone and do not necessarily reflect the views of Flipping Frenzy’s proprietor or editors.
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As we look forward to a new year and reflect back on the one just past, we must ask ourselves, “What ever happened to our American way of life?”

The email headline for Originator Times on the December 26, read: “Mass Layoffs, Rampant Fraud, and More - The Top Stories of 2007.” Indeed, a very frightening headline.

The “Mass Layoffs” referred to put many innocent, hard working people out of work. (Read my November 21st guest blog entry, “Homeowners Aren’t the Only Ones Hurt by the Mortgage Meltdown” here on Flipping Frenzy). These are just some of the casualties of this crisis. This fraud for greed is what has hurt so many honest, hard working Americans.

“Rampant Fraud” as the Originator Times headline reads, oozed from every level of our society–from the naive to the highly educated to knowledgeable corporate executives. The extent of the fraud committed has no equal in our history. It was truly “Greed Gone Wild,” an epic we will be watching for years to come.

I believe we are winning the war on fraud. I still believe that the majority of us in the real estate industry are good, hard working, honest people. But for those relative few who have harmed the whole, I advocate the best way to fight this is to make the guilty pay stiff penalties and then publicize it, as the Originator Times does in the following article:

ABN AMRO To Pay $41 Million For HUD Fraud

Office of the Comptroller of the Currency announced a more than $41 million settlement against mortgage giant ABN AMRO Mortgage Group for falsifying documents in tens of thousands of loans insured by the Federal Housing Administration (FHA). This landmark agreement represents that largest monetary settlement of an enforcement action in FHA’s history.

“Mortgage giant,” ABN AMRO falsified documents. But who are the people who knowingly allowed this practice to occur? Whoever they are, they must be held accountable for their actions as individuals. Where was senior level management? Twenty-eight thousand loans are in question here, and the article speaks only of several underwriters and a handful of others. Fraud of this magnitude could not have happened without upper management’s knowledge and direction.

ABN AMRO Holding N.V. is the parent company of the ABN AMRO consolidated group of companies. It provides a range of financial services on a worldwide basis, including consumer, commercial and investment banking. Its group structure comprises: seven Client business… (more information about ABN can be found by clicking here).

ABN AMRO is truly a giant. Its stock stayed constant even with this announcement. I have heard no mention of any actions taken against senior management, but surely they must have been well aware of what was going on.

Keith E. Gottfried, HUD’s General Counsel said, “This action demonstrates our steadfast and enduring commitment to making sure HUD’s programs are administered in accordance with the letter and intent of the law and are free from fraud and abuse.”

A settlement so insignificant to such a large corporation with no consequences for breaking the “letter and intent of the law” by any individual has no meaning.

In another Originator Times story, entitled “Originator Allegedly Takes ABN AMRO For Over $2 Million,” the pot seemingly calls the kettle black. Here, ABN reportedly takes action against 149 properties, making the perpetrators pay back the money they scammed, and rightfully so. But this is just a civil suit, not a criminal suit. I believe that the perpetrators should also be held accountable for the crime they committed. In the same way, the executives at ABN AMRO who facilitated fraud against HUD should also pay a price for their criminal actions.

There is no excuse for fraud of any kind or to any extent. We must fight this problem from the top down. While other individuals are being criminally charged and convicted and receiving sentences of 20 years and even “life,” the ABN AMROs of the world get off clean. Is defrauding the government (HUD) and all taxpayers a lesser crime than defrauding individuals? Greed has overtaken our sense of responsibility at all levels–even government.

As the New Year unfolds, we will see more stories of fraud from the past but fewer in the future. With the spotlight on fraud in real estate and the continuing effort to prevent it, the mortgage industry will cleanse itself. The programs allowing the fraud are no longer available, and lenders are raising their standards on underwriting loans and requiring underwriters to do their job and not turn a blind eye. Our focus now should be on fixing this huge problem we have and restoring the great American middle class.

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