When facts could no longer be ignored, that fraud was still being committed in every state, the Congress passed another round of rules and regulations for the mortgage industry. Not that there were no laws already in place that could have done the job; no, another level of bureaucracy was added to regulate the evil perpetrators. State legislatures often mimic the Feds and pass laws to do essentially the same thing. Having done all that fraud is still very much with us, but some states, Massachusetts being one of them, has begun to vigorously enforce these new laws. They have issued cease and desist orders against a whole host of loan originators, one large and very prominent broker has been shut down, and ongoing investigations are uncovering more and more dirt. There are two classes of fraud in the mortgage industry; FFH, which is fraud committed in order to obtain a home, and FFP which is fraud for profit. Mortgage loan originators are often complicit whenever fraud is committed, but the man in the street bears a large amount of the blame as well. Congress bears a major portion of the blame for having demanded that Fannie Mae, Freddie Mac, FHA and VA all dumb down their credit requirements. It brings to mind that old anti-war song from the 70’s , “When Will They Ever Learn”.
President George W. Bush tried on seventeen different occasions to have Congress instigate a stronger oversight of Fannie and Freddie because of the profligate leadership of both these mammoth entities, but he was thwarted in each and every case. Future generations may never know how our current meltdown began. Pity.
