Mortgage origination fraud: The missing links

Collins and Nigro discuss the three root causes of the mortgage crisis that launched the Great Recession. First, fraud made easier by inadequate regulation created the ideal climate for deceptive dealings in the solicitation, origination, financing, sales, and servicing of mortgage loans. Second, indiscriminate use of alternative loan products, like subprime and alternative A-paper (Alt-A) instruments--whether for those who easily would have qualified for higher quality products or for those who should not have qualified for a mortgage loan under any circumstances--were the earliest and most costly defaults in US housing history. Taking the first and second findings together, Nguyen and Pontell suggest a compounding effect of one finding on the other. Finally, Nguyen and Pontell (2010) argue that there is a lack of accountability in the mortgage lending industry in the form of regulation, enforcement, and governing mechanisms, which allowed for the rapid escalation of mortgage fraud.