Fraud Drives Mortgage Meltdown (WSJ)

It didn’t take long for the industry as victims theme to emerge in the media.   Today’s Wall Street Journal’s “Fraud Seen as a Driver In Wave of Foreclosures” (paid) says it all.  The industry is quickly taking the position that their problems are mostly the result of fraud.  I fault the Journal for bending their lead to the industry message, but do give them credit for exposing the heart of the matter for those willing to read further into the article:

“Yet the system itself bears blame. The evolution of mortgages into a securities instrument turned loan origination into a competition. Caution gave way to a push for speed and volume. Embroiled in an all-out war for market share, issuers reduced barriers to credit, for example, by offering so-called “stated-income” loans, which require no proof of income. “

Expect similar reportage, with less focus on the systemic causes in other media outlets.  We might as well start calling the current unpleasantness the “Fraud Bubble.”