“These problems are not related to reset issues,” he said. “That’s a ruse.”

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“So when they set aside $1 billion that’s a day’s worth of funding,” he said. “I’m not sure that addresses what the real problem may be.”

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“This is not a sub-prime crisis. This is a stated income crisis,” said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, which works with lenders, insurers and investors to recover losses related to mortgage fraud…

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“(The mortgage lenders) knew the bad credit quality of the loans being originated, they took their profits, and now the ship sinks,” said Bob Simpson, president of Investors Mortgage Asset Recovery Co. in Irvine. “They will all walk away rich. And we are left with neighborhoods full of foreclosures.”

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“Borrowers don’t have the savvy to know which documents to falsify. They’re often coached by loan officers or brokers,” says Robert Simpson, president of IMARC, a Newport Beach (Calif.) mortgage-fraud investigator. Banks are starting to realize that this puts them at risk. “Banks used to say that a certain amount of fraud is the cost of doing business. Not anymore. It’s costing them a lot of money, and they’re finally going after it,” says Simpson.

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“When values don’t go up, lenders foreclose and they conduct investigations,” Simpson said. “I expect the number of frauds to increase at the same pace as the number of foreclosures.”

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The loan originators were incredulous. One broker stood up to say, “But lenders created stated loans so we could state whatever income would get the borrowers the loan.”

If I read his facial expression correctly, the FBI agent couldn’t believe what he had just heard…

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