Many people might have thought there was a lot of mortgage fraud (e.g. applicants lying about income) during the housing bubble, but the Post tells us that incidents of fraud rose in 2008 from prior levels. What's wrong with this picture? It's simple folks. During the bubble years, the banks could not care less about fraud because they wanted to issue the loans. They could sell anything into the secondary market, so they didn't mind if everything on application was a lie (they may have even encouraged it, so the borrower appeared to meet lending standards). Now that the bubble has burst, and the private secondary market has virtually disappeared, banks are seriously scrutinizing loan applications and going after those committing fraud.
--Dean Baker
