Fannie Mae ceased to do business with the company, called Taylor Bean & Whittaker mortgages.
Taylor Bean, was a crisis. Its checks bounced.
But Mr. scrambled Farkas and Taylor Bean survived to commit fraud more.
This week, Mr. Farkas, 58, has been recognized guilty to 14 counts of fraud and conspiracy in what was now a scandal of $ 2.9 billion.
Testify in his own defence before the Federal Court in Alexandria, Virginia, Mr. Farkas explained that in 2002, Taylor Bean had sold eight real loans to a lender who resold to Ginnie Mae, the Government agency that buys loans guaranteed by the Federal Housing Administration. When loans were found to be ineligible for the guarantees of F.H.A., Ginnie Mae demanded his money.
Taylor Bean have no money. Thus, he created fictitious and used loans as collateral to obtain money from a bank. The loans should not be sold, he said, but a subordinate improperly put them in a group of loans to be sold to Fannie Mae.
"I had no intention to make payments on these loans," he testified. "It was not my duty." It was simply a way to keep track of, and it is, it is an idea that I probably was not a good idea, but idea I had was how to do. ?
It was also an idea that something of very strange happening in Taylor Bean. It should have been the end of the company.
But it was not. Fannie Mae would no longer do business with Taylor bean, but there were still Ginnie Mae and the other government-sponsored enterprise, Freddie Mac
"Ginnie Mae doing nothing," said Mr. Farkas. "Freddie Mac is down and sent to the head of the Chief of the division on us and all these people, and they decided that they would be, we let live.".
Fraud would last for seven years, ending in 2009, because the main Bank of Taylor Bean, Colonial Bank of Montgomery, Alabama, itself was in danger of failing. Mr. Farkas has come up with a plan to recapitalize the Bank and obtain federal rescue money appear, but it didn't work.
Fannie escaped unscathed. Freddie and Ginnie does not have. Two large European banks, Deutsche Bank and BNP Paribas, thought their 1.68 billion in loans was fully guaranteed by the guarantee. But only one-tenth of this guarantee was real. Colonial had lent hundreds of millions on the security of mortgages that were either non-existent or had already been sold to someone else.
Mr. Farkas was the seventh convicted in the case. Witnesses against Mr. Farkas the other included six - four frames Taylor Bean and two of the Colonial Bank, who pleaded guilty. Mr. Farkas was sent to prison and is awaiting a sentence which is almost certain to leave imprisoned for life.
The Ministry of Justice, which has been criticized for the rarity of the criminal charges arising from the financial crisis, celebrated the verdict. "His regime scandalously brazen poured fuel on the fire of the financial crisis," a Deputy Attorney General, Lanny a. Breuer, said. The United States in Alexandria Attorney, Neil h. MacBride, stated that Mr. Farkas had orchestrated "of the longest and the largest bank fraud schemes" never given.
Mr. Farkas did not prove a very good witness on his behalf. He insisted on no crime has been committed, but his understanding of the Act appears to be a little unusual.
Patrick f. Stokes, a Deputy Chief of the section of the Department of Justice criminal fraud, asked Mr. Farkas if he thought agreement Taylor Bean with Colonial Bank allowed the mortgage firm "sell fraudulent, counterfeit, fictitious loans" to the Bank.
"Yeah, I think that Yes," he replied.
"It is very common in our business, sell - because it is all the data, it is really nothing else that data - to sell loans which do not exist," he explained. "." "It happens all the time".
The second most important player of fraud, after Mr. Farkas, was Catherine Kissick, Director of the Division of the Colonial bank mortgage warehouse lending. His division was in Ocala, Florida, who was also the headquarters of Taylor Bean, and it seems to have been hired by Colonial so that he can obtain business Taylor Bean, which she had treated for his former employer, SunTrust.
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