That's the mortgage loan officer at the Bank's job! Geeze - you want government to run everything. Obama would love it! Borrowers/lenders colluded because the CRA made it almost illegal for Banks to underwrite loans.
What is the government's job is making sure fraudulent operations like Acorn can't operate - and that means stringent laws about loan to value, income verification, amount limit on seconds, limit on number of houses you can leverage, equity requirements etc.
It is up to the Banks to enforce these laws...you seem to want some weenie in DC deciding if your a good guy or not. I want my Banker, who I have built up a relationship with over time, to be in charge of that.
CRA gave breaks to the poor or minority groups. What makes the government hypocritical is they are shocked that many of these victim groups are defaulting on their loans. CRA did not apply to nonvictim groups. You and I are suppose to meet debt ratios and enter accurate info on the application. Example if you earn 45000 a year and you put down 60000 as your income, that is fraud even if the bank does not verify it. I dare you to do that on a loan application and use that as an excuse in front of a judge when you are caught. Better yet, show me in the CRA regs that encourages an applicant on a conventional loan to falsely enter his/her income/asset. On the other hand if you enter 45000 and the bank gave you a loan that requires a minimum income of 60000, then you as the borrower is off the hook legally. The bank commits fraud by putting your loan into a portfolio and tells the investor that all the loans data are verified and the loans were givened to solid borrowers backed by real property. There is a civil law suit against WaMu where the mortgage originators are now the star witnesses against the bank. Read about it and you will see that the borrowers committed fraud and the mortgage originators under pressure from the immediate supervisors encouraged fraud. The government is not going to prosecute because they need the banks to cooperate during the bailout, but fraud was committed by borrower and bankers. It is common knowledge amongst real estate agents, builders, bank staff and mortgage staff that false entry and collusion is common, and there is grounds for the feds or state to audit the loans originated by banks that fail miserably. There are also state laws that govern bank practices, and based on what I read about the WaMu case, many of these regs were violated and the borrower/lenders can be criminally liable.