Shocked! by mortage fraud
A teensy piece.
We need to extend the full-on opera clap to David Cho of The Washington Post for a very interesting look at the mortgage fraud phenomenon, which has only recently begun to get the attention it deserves. I believe that his opening example, a multimillion-dollar Atlanta case in which hundreds of people were in on the scam, represents just the tip of the iceberg.
Cho's piece covers the hard frauds, like the Atlanta scheme, but also details a practice that some of the rest of us have been screaming about for a while. When it's in everyone's best interest to approve loans as quickly as possible, jack up prices, and allegedly "transfer" the risk to others, you revert back to the rule of the jungle, and things get messy.
Easy money created huge demand for mortgage loans. Huge demand created a jump in prices. Those price jumps, coupled with euphoric media coverage and real estate industry propaganda about housing as an "investment," spurred greater demand and higher prices. The loans only got worse as the industry struggled to put people into properties those borrowers couldn't actually afford. No one should be surprised that some brazen scams resulted. But everyone should be shocked that the entire industry is beginning to look like a soft scam itself...