I was certainly happy to come across this latest working paper from the Federal Reserve Bank of Philadelphia.
It somewhat confirms that I am not losing my mind over here…there is obviously a widespread epidemic of mortgage fraud once again endangering our entire economy. How else would I be able to throw darts at a zillow map and find mortgage fraud with less than ten darts! It only took two darts yesterday and I hit the mother lode…coming tomorrow! Here is the somewhat “reserved” conclusion:
We identify widespread occupancy fraud in residential mortgages, both during the housing bubble and also in recent origination vintages. In contrast to previous studies, we are also able to show that occupancy fraud was common in the GSE market and in loans held in portfolio, not just in private MBS. We find that mortgage borrowers who misrepresented their occupancy status performed worse than otherwise similar declared investors. Their default decisions are also more strategic than other borrower types. Our results are economically significant and suggest that such fraud may also pose a risk in future boom-bust cycles. One area for future research is understanding whether behavioral characteristics may help explain why some borrowers were led to speculate in housing markets through fraud.
My only problem with the report is the absence of alarm about the complete lack of controls or enforcement that has once again led to this problem. The report is a bit dry, so I will summarize it in a different way for you:
If too many people rob banks, it is bad for our economy.
1000’s of people are robbing banks.
We know who those people are and where they live.
They have signed confessions (generally in the form of multiple Owner Occupancy Deed Trusts…).
For some reason, even though robbing banks almost caused another Great Depression, and we made alot of waves about how it can’t happen again, we aren’t going to provide enforcement or consequences for the criminals who rob banks.
We aren’t really sure why people are driven to rob banks!?
Maybe I should rob a bank too!
Ok, the last point isn’t in the report, but it’s implied!?