Summary:
Mortgage fraud has become a wide-spread problem in today’s society. Some would even label it as the ideal “white-collar” crime to commit. For a period of time, the crime has been exceedingly popular due to its lucrative nature and the fact that the fraud is not easily detectable. Back during the North-American real estate boom a few years back, banks were eager to hand out mortgages and were very lenient with their terms. Someone with no steady income could easily secure a mortgage for a house. Many ordinary folk were swindled into taking out a mortgage to purchase a house which they were told would be sold later for profit. In the end; the perpetrator walks away with the dough, the buyer is in debt, and the bank is stuck with an overpriced house.
Connections:
The connection my article has with the text is the Generally Accepted Accounting Principles (GAAPs), the various financial statements involved in the world of business and by extension the financial position of an individual or business. Nowadays, in an economic downturn, financial institutions are careful in their procedure of securing a loan. They wish to make sure that they have a way to recover their money should they need to do so. To my knowledge, the authorization of poorly secured mortgages is not directly violating any of the accounting guidelines. However, it is still ridiculous that individuals without steady jobs would be able to take out a mortgage to buy a house. The banks went wrong when they neglected to thoroughly look into the financial position of the individual requesting a loan before granting it. With such an obvious loophole, it was only a matter of time till someone choose to abuse it.
Reflection:
In my opinion; all institutions that handle substantial amounts of money, including banks, should be required by law to follow the guidelines set out by the generally accepted accounting principles. In the case of my article, Robert Manuel Moniz of Montréal gained approximately $5.0M C.A.D. from his scheme. If the bank had been more careful with their procedure of authorizing the mortgage requests, this would likely not have happened. The bank loses the money but in the end, it is us ordinary folk that gets hit the hardest with scams like these. Financial institutions will pass off their loss to users to their service in the form of higher interest rates and service charges.
