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Mortgage Origination Fraud and the Global Economic Crisis: A Criminological Analysis

NCJ Number
Criminology & Public Policy Volume: 9 Issue: 3 Dated: August 2010 Pages: 591-640
Tomson H. Nguyen; Henry N. Pontell
Date Published
August 2010
50 pages
This study investigated the role of mortgage fraud in major financial crises and examined the criminal acts and motives of those involved in the mortgage industry.
The study outlined in this article analyzed the responses of 23 subjects previously and currently employed in the subprime lending industry to understand the implications and role of white-collar crime in the contemporary subprime mortgage crisis and to document the rationalizations that offenders use to explain their involvement in mortgage-related crimes. The subjects represented five sectors of the primary mortgage market, including brokerage, lender, escrow, title, and appraisal offices. Secondary sources of data for the study included media accounts, government reports, and industry studies. The research findings detail accounts of mortgage frauds in the subprime lending industry that resulted from inadequate regulation, the indiscriminate use of alternative loan products, and the lack of accountability in the industry. The study results suggest that the problem of mortgage origination fraud would be prevented best by major reform of financial policies and lending practices that characterize the subprime mortgage industry. Several broad recommendations are proposed in this article that highlights the need to recognize the potential for insider fraud, to enhance government regulation and oversight, to tighten loan qualification requirements, and to increase standards of underwriting. Observations are offered concerning the need to highlight white-collar crime in understanding the global financial crisis and to preventing future debacles. Table and references (Published Abstract)