Friday, August 17, 2007

Are fraudulent practices partially to blame in the current mortgage crisis?

We seem to be facing a looming financial crisis because of irresponsible lending practices that enabled a lot of people to buy property that was beyond their means.

Many will blame the people, who took out the mortgages, but are there other factors bear consideration when looking into the cause?

Although fraud hasn't been cited as a reason, government investigators might be pretty busy in a effort to discover why this problem occurred.

The Herald Tribune is reporting:

Within the next six months, it should be clear how regulators will proceed against those companies, said Michael Malloy, a former enforcement official of the U.S. Securities and Exchange Commission.

"Odds being what they are, somebody's going to get hooked," said Malloy, who now teaches at the McGeorge School of Law, part of the University of the Pacific. "From an investigative point of view, they'll be looking at how much of this was the result of stupidity and misfortune and how much is broader manipulation."

The broader manipulation could include failing to appropriately disclose the value or the risk of securities backed by subprime loans, which could constitute fraud, experts say.
Mortgage fraud is a bigger problem than most people think.

A good place to learn about all the various schemes and who is getting caught committing mortgage fraud is the Mortgage Fraud Blog, which can be viewed, here.

Herald Tribune story, here.

1 comment:

Sukobiru said...

A few years ago I signed on to a mortgage to buy a house. The only problem was that I didn't have enough for the down payment. NO PROBLEM said the realtor... the mortgage guy has a way around that! What they did was give me a 2nd mortgage based on the equity of the house I was buying into in order to make the down payment for that house. In the end I had 2 mortgages to make each month, and I found myself spiraling into debt.

Yes, I got out of it. I felt I was stupid to jump into it in the first place, but thankfully I got out early and with my shirt still securely on my back.