Flipping Operation By Convicted Con Man Illustrates "Anything Goes" Lending Mentality

In Kansas City, Missouri, The Kansas City Star reports:

• If you wonder how we got to this point — a $700 billion Wall Street bailout for toxic mortgages — the case of Raymond Zwego is a good place to start.

• While on probation from a previous Kansas City federal bank fraud conviction in 2003, Zwego began constructing his own little housing bubble. He purchased 61 area properties, in many cases using straw buyers and falsified paperwork. He fueled the exercise by illegally obtaining $16.9 million in mortgages, willingly contributed by lenders who never realized they were dealing with a career con man until it was far too late.

• Almost all of the homes he purchased eventually went into foreclosure, contributing to the tsunami of red ink that has come perilously close to sinking the country’s financial system. At Zwego’s sentencing on federal mortgage fraud charges(1) [last week], his lawyer, Daniel Harrington, acknowledged that the bygone days of anything-goes mortgage lending contributed to his client’s crimes.

For more, see Mortgage fraud sentencing illustrates anything-goes lending environment.

(1) According to the story, Zwego was sentenced to 10 years in federal prison and was slapped with an additional three years for violating probation on his bank fraud conviction. He was also ordered to pay $5.6 million in restitution.