Housing Rescue Operations a Boon to Mortgage Fraudsters

The FHA’s experience of yore is not unique. Not for profits that provide loans to low income borrowers also have shown default rates in line with prime borrowers. It is possible to make sound loans to homebuyers who look risky on paper…provided you do real due diligence.

But now the FHA has been assigned a role in the “save the housing market” game plan, which means notions of prudence get compromised. A story in Washington Monthly details some of the side effects. And the troubling bit is that while this activity isn’t wide scale, the Treasury proposals to streamline the short sale process will play right into this particular type of fraud.