Allegations of mortgage fraud are again echoing through the mortgage industry. Many people think mortgage fraud is perpetrated by potential borrowers. Evolution in a greedy mortgage industry seemed to hit a balance of responsibility with no-doc loans and no verification. Images of shady deals, where a loan officer was told about rental properties that leased for more than they did, and unverified income from eBay and Amazon, give the impression that the potential borrower is running a scam.

Lenders can run their own scams. Altering one’s debt to income ratio by overlooking certain factors, charging unwarranted fees for courier services, duplication services, documentation and other sham services is fraud to some, and routine business to others. Introduce a second layer for potential fraud – mortgage brokers – and lines can blur. Obviously all mortgage brokers and their clients don’t commit fraud, but HSBC and others have eliminated independent mortgage brokers from the equasion.

Joseph Mason, an associate finance professor at Drexel University, expects to see more problems with mortgages that were disguised as prime. “Much of prime is not really prime. The Alt-A base (has) been found to be really subprime. And much of the subprime has turned out to be flat-out fraud,” Mason says. “Borrowers over-borrowed, brokers over-lent, investment banks oversold performance and rating agencies overrated (mortgage-backed securities). What we thought was quality was not quality,” he says.

Household – HSBC Watch, a consumer advocacy organization the helped customers of former predatory lender Household International, said Household perpetrated mortgage fraud relative to second mortgages and later tried to blame all of it on their customers. “Household International still holds the United States record for predatory lending settlements,” the group said. “HFC and Beneficial are still operating under those names, but borrowers remember,” they said.