Fascinating that despite years of "inflating or exaggerating [borrower] assets, incomes, and job titles” this bank maintained a delinquency rate less than a twentieth of the national average. In 2009, they had 4,399 mortgages and only 16 were in trouble.
In part it's because they were inflating/exaggerating legally recognized incomes (which were being systematically understated for the purpose of tax evasion), in a fashion which corrects the number towards a borrower's actual ability to repay the loan.
Part of me wonders whether in addition to the cultural factors counseling loan repayment whether some buyers did not have an actual, and possibly reasonable, fear of the bank taking extrajudicial measures to collect on debts. (i.e. "If you don't pay, we send thugs to beat up your family.") This is suggested as a standard enforcement mechanism for hui, which were known to be a common funding practice for the bank's borrowers, and those borrowers might naturally assume that the big, well-connected bank had levers stronger than sending a strongly worded letter in the event of default.
One imagines that the yakuza have a better repayment rate than borrower profiles would suggest, too, but that isn't primarily a consequence of their fluffy-bunny-community-involvement.
Once you give them your down payment, you go into attorney review, at which point each side review details of the contract. Usually, during this time, you'll write into the contract that the buyer has 30 days to acquire financing (or some number like that). At this point, the buyer places the down payment (or a percentage of it) into escrow as a good faith payment. If the buyer is unable to acquire financing by the date, the sale is cancelled with the down payment being returned.
However, once financing is guaranteed by the bank, both sides agree that they are going through with the sale, and any reason to cancel now means the buyer would lose his down payment.
In this case, the bank pulled funding at closing because they realized that documents were provided fraudulently. Hence, lost down payment.
This guy is a real piece of work. Look for extra context when you see his name. He was the DA in the Aleynikov case as well.