Former Taylor, Bean & Whitaker Mortgage Corp, Lee Farkas was sentenced to 30 years in prison for his role in a $3 billion fraud that has rocked Fannie Mae and Freddie Mac.
On Thursday, a federal judge sentenced Lee Farkas, former Chairman of Taylor, Bean & Whitaker Mortgage Corp. to 30 years in prison for operating a multi-billion dollar fraud scheme that led to the collapse of the mortgage lender and one major bank.
The first signs of what would eventually lead to a $3 billion fraud surfaced in January 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.
Over the next two years, Fannie Mae, the government sponsored enterprise which issues nearly half of all mortgage-backed securities, determined in excess of 200 loans acquired from Taylor Bean were bogus, non-performing or lacked certain critical components such as mortgage insurance.
It has come to the surface, that Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, public testimony and court papers show Fannie Mae only tried to rid itself of liabilities and cut ties with Taylor Bean.
Fannie Mae’s cutoff, Freddie Mac began picking up Taylor Bean’s business within a week. Freddie Mac soon became Taylor Bean’s largest customer and the mortgage company grew to be one of its biggest revenue producers, accounting for about 2 percent of single-family home mortgages by volume in 2009.
The trial of Farkas and his Taylor Bean cronies resulted in the only major criminal conviction stemming from the financial crisis. A crisis that followed the September 2008 collapse of Lehman Brothers, the US government takeover of Fannie Mae and it’s rival Freddie Mac.
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