United States v. Phillips

731 F.3d 649 (7th Cir. 2013)

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Nature of the Case

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Facts

Lacey Phillips (D) and Erin Hall (D) are a couple. Phillips (D) is a hairdresser, Hall (D) a barber. Ds found a house they wanted to buy priced slightly below $250,000. The bank, Associated, turned down their mortgage application because Hall (D) had a recent bankruptcy and because the bank deemed the couple's joint monthly income of $3,800 too meager to justify the loan of more than $200,000 that they needed. Hall (D) turned to a mortgage broker named Brian Bowling. Bowling-a crook who brokered fraudulent loans (but there is no indication that Ds knew or suspected that he was a crook)-steered the couple to a federally insured bank of dubious ethics named Fremont Investment & Loan. Associated Bank was a reputable bank. Fremont was not. Fremont's specialty was making 'stated income' loans-known to the knowing as 'liars' loans' because in a stated-income loan the lender accepts the borrower's statement of his income without trying to verify it. Ds played the game and soon lost their home. The loan interest rate was adjustable; it reset automatically after two years. Though hapless victims of Bowling, Ds were convicted in part on the basis of his testimony; for he turned state's evidence and was rewarded for helping to convict his victims by being given a big slice off his sentence. At P's urging, the trial judge excluded, as irrelevant, evidence that might have persuaded the jury that the Ds either had not made statements they knew to be false or, though knowing the statements to be false, hadn't made them for the purpose of influencing the bank's action on their mortgage application. The district judge ruled that if mortgage applicants 'sign something and they send it in, they're attempting to influence the bank. Ds were convicted and appealed.