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PBS' "Frontline" is now using the word fraud in its "Untouchables" program, which is an improvement over previous investigatory documentaries into the financial crisis, but they still fail to explain specifically what the industry itself termed to be "liar's loans."
The mortgage originators:
1.) doctored income statements to lower the reported debt-to-income ratio.
2.) pressured real estate appraisers to value the properties above value to lower the loan-to-value ratio.
With those two variables, originators made what looked like safe loans (low risk), but at a premium yield (exceptionally high interest rates). That alone should have been warning sign. On the basis of those two variables, originators were awarded bonuses for hitting a "sweet spot." Even if borrowers lied, they would have no idea what number to put down as income to hit that magic number. Also, borrowers would not and could not tell the appraiser to overvalue the home they were buying.
The Lenders Put the Lies in Liar's Loans and Bear the Principal Moral Culpability
by William K. Black, former S & L regulator, two-time government whisteblower & exposer of the Keating 5.
Also, whether or not criminal charges applicable, the government as a regulator and creditor has a responsibility to remove incompetant or fraudulent managers, through the regulatory process. They don't even do that. It's government of, by, and for the 1%. The White House has failed miserably. "The financial sector is a lot more trouble than it is worth."-Warren Mosler.
Slap on the wrist fines are just a cost of businesses easily justified by the profits made on the frauds committed.