The housing crash narrative has been driven into our heads relentlessly by this point. The big bad bankers robbed the little guys blind by tricking them into signing terms they didn’t understand and couldn’t afford, right? Well maybe not. Steven Malanga, at Real Clear Markets, gives us the other side of the story:
From 2001 to 2007, in fact, reports by lenders to the federal government of suspicious activity on mortgage applications had climbed more than 10-fold to 46,717. Moreover, those numbers merely hinted at the full extent of the problem since they only included information submitted by federally-insured institutions, and only represented fraud that lenders uncovered. By one estimate, total losses from fraudulent mortgage applications were estimated to be about $3 billion annually—and growing. The deception was clearly widespread, including false statements on mortgage applications about family income and current levels of indebtedness, submission of phony documents, and lying about the intended uses of the property that was being purchased.
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