The Second Wave of Mortgage Fraud

It was almost exactly one year ago that I posted about the burgeoning criminal defense work stemming from the mortgage fallout.  Last summer, it became clear that the feds were all over this mess, and the first wave of investigations were already well under way.  But that was last summer.

As the Texas Tornado, Mark Bennett notes, the halcyon days of last summer are over.  The second wave is coming to fruition now, and this one is going to be different.  If you didn’t get a phone call last year, then you missed it.  If the phone rings now, don’t expect much.

But mortgage fraud became so easy in the last decade, and the techniques for committing it became so widely known, that it required no special education or training. It was like stealing lawnmowers out of people’s garages. Mortgage fraud became a white-collar crime committed by blue-collar people.

Blue-collar people are often able to hire competent criminal defense counsel for most types of cases. Many of my clients are blue-collar people. But the amount of money required to properly fund the defense of a document-intensive federal case like a mortgage fraud case is much greater than that required for the defense of most any other sort of case (capital murder cases and drug cases involving wiretaps being among the exceptions).

While Bennett puts the time frame (a decade) far longer than I do, we agree on the other points.  In the first wave, the big guys with high profiles were taken down.  These were the ones who made a ton of money off of a mortgage biz where any moron could get rich.  And many a moron did.  All one needed was a clean suit, and winning smile and no scruples.

But these cases require enormous amounts of time because of the monumental volume of documents involves, not to mention the typical disorganization of the documents combined with the government’s preferred means of mass disclosure, which invariably serves to make document review as difficult as humanly possible.  It’s just an organizational wreck, and reconstruction of documents is like death by a thousand knives.  It horrible work, and it takes forever.  It is pathologically boring.  But it has to be done.

Second wave mortgage fraud defendants are a different gang than the first wave.  These are the ones who leased the most expensive Mercedes available, took a few vacations, and wasted every penny they made.  They have been out of work for the past year, since the office shut down when funding disappeared overnight, and have tried desperately to figure out how they can maintain the image of prosperity while hawking their gizmos on eBay to stay afloat.

By the time they get the 6:30 knock on the door, they are a rock.  And you can’t get blood from a rock.  They pull out the suit they used to wear to closing to come to your office with the appearance of solidity, but empty pockets.  One offered me his Rolex watch off his wrist, his last valuable possession. 

Many of the second wave defendants will believe themselves too good to be represented by a federal defender.  They want a private lawyer, because they are prominent businesspeople in their minds.  They will explain to you in detail about how they are not street criminals, and will most assuredly pay for their legal representation.  They just can’t get the retainer together at the moment, but don’t fear.  They will pay.  They promise.  They really, really promise.  And they may even mean it when they say it.

But they won’t and the can’t.  Those days are gone, and there is nowhere for them to turn to earn the money they need to defend themselves.  Their memories of the glory days won’t help them now.  And their hope for fiscal redemption is a pipe dream.


So what happens to them, those who don’t have the wherewithal to pay for a zealous defense? The luckier ones won’t have enough resources to hire lawyers at all; the really unlucky ones will have enough money to hire inexpensive lawyers.

The unlucky ones will find themselves in the perpetual quandary of criminal defense, having given away their Rolex and obtained nothing but quick plea in its place.  Whether the inexpensive lawyer means to do a good job or not, the crushing burden of defending a paper-intensive case will prove far more work than they ever imagined.  For those who want to break into white collar defense, these case will teach you a very important and painful lesson.  These will not be anything like your basic drug conspiracy.

If you are one of the lawyers on the receiving end of the telephone call, bear this in mind.  If you care about your integrity, don’t put yourself in a position where you take what little the client may have when there is no possibility that you can provide the representation he requires.  If you’re a client in need, this is the time to get very real about your status, and not place yourself in a position doomed to fail.