Years ago John Bley, Washington States Financial Institutions Director, at a Federal Reserve Board hearing in San Francisco once said Predatory lending isnt a new problem, its just that the name has changed. What was once called mortgage fraud is now called predatory lending. Under either name, our mission to investigate violations and enforce the law has remained the same. If predatory lending is now called subprime that tells me that mortgage fraud and subprime are the same. Many investors are beginning to think so too.
It took twenty years for the name to change twice. But history does not change as one’s standards go down. Years ago a borrower needed an inflated appraisal, a false comparative market analysis and phony rental income to qualify for loans we commonly see today. Mortgage fraud by any other name is still mortgage fraud. When packaged as asset-backed securities it becomes securities fraud. If pension plans are tied to fraud perpetuated by more fraud everybody loses eventually. When scams are sold to overseas investors it also hurts the fabric of America.