“Rising real estate values over the past few years threatened to price new homebuyers out of the market and led some to attempt purchases before they were creditworthy. The higher valuations also led some individual real estate investors to speculate and stretch the truth on applications for multiple properties, especially in active markets, such as Florida and Nevada.
They were aided in this tactic by industry professionals who hoped that any future loan problems would be covered by a profitable sale of the collateral. Credit standards were loosened. More importantly for fraud, documentation requirements were also reduced.
There has been a long history of fraud and sour consequences associated with low/reduced/no documentation loans. As an example, loan servicing staffs are discovering a substantial percentage of prime and non-conforming delinquencies are for loans where the applicants stated their intent to occupy, but were in fact, rental properties at the outset.”
∙ Tenth Periodic Mortgage Fraud Case Report to the MBA (pdf) [mari-inc.com]