Have laws been changed to prevent the moral hazard of loan officers approving so many people on faulty loans?

EthanR answered 2 months ago …

I have to disagree with the tone of the above answer, as it paints all with the same brush in a very negative way. As a Real Estate agent, I will say that you are correct that I make no money if a buyer can't get loan approval, but there is an implication in your answer that somehow loan approval will get done no matter how the buyer's credit or debt to income looks. This is certainly not the case. When a customer can't get loan approval, what we do is to provide them with the information on how to improve their credit or lower their debts, so they can try for approval again in 6 or 12 months.

As for appraisers, if anything they are very conservative right now, and have been so for the last two years. As one appraiser told me, "I don't have time to argue with 10 underwriters on the phone all day. I'm not sticking my neck out on any of my appraisals."

As for your assertion that even moral people will bend the rules to try to survive economically, if that is so true then why have thousands of mortgage companies gone out of business in the last two years? Wouldn't they have just bent the rules?

The entire industry is under a microscope right now, and it's pretty difficult for even the most corrupt of individuals to get away with anything. The mortgage people with whom I work tell me that the underwriters are going to the strictest extremes on every deal.

Here are a few articles that you may find interesting on mortgage fraud investigations:

http://www.fbi.gov/publications/fraud/mortgage_fraud06.htm

http://www.realblogging.com/real-ralph/colorados-attorney-general-proposes -legislation-curb-mortgage-and-foreclosure-fraud