A report from the Wall Street Journal. "Federal and state authorities are investigating allegations of an elaborate mortgage fraud involving about 100 people living in or near Martinsville, VA. who say they unwittingly took out loans to buy houses at inflated prices in Indiana. Now, many of the loans are in default, the borrowers' credit ratings are in ruins, and lenders are pursuing the organizers of the purported investment group in court."

"Companies stuck with the defaulting loans include Countrywide Financial Corp., the nation's largest home lender, and Argent Mortgage Co., another big lender. Representatives of the borrowers put the total value of loans involved at about $80 million, which would make it one of the largest mortgage-fraud cases ever."

"Part of the problem, say critics inside and outside the industry, is that, in their haste to earn commissions and fees, loan officers and brokers are asking fewer probing questions. 'We aren't asking questions, and we aren't verifying like we used to,' says Bob Simpson, (who) helps lenders recover losses from fraud. 'For legitimate, honest consumers, that's a good thing,' but it creates opportunities for crooks, Mr. Simpson says."

"Kurt Pfotenhauer, a senior vice president at the Mortgage Bankers Association in Washington, says the pursuit of efficiency in making loans has made the industry more vulnerable to fraud."

"Nancy Muse heard about the group from a friend. Months later, Ms. Muse found out she was in trouble when she inquired about buying a modular home for herself. A representative of the home-building company checked her credit and told her she already owned four homes."

"One church secretary, who says she heard about the investment group from her pastor, says she and her husband, a building-maintenance worker, learned that they were the owners of 14 homes in Indiana, a state they had never visited."

"Fannie Mae acquired some of the loans from Countywide and has reported its findings in the case to law-enforcement officials and regulators, a spokeswoman said."

"Fraud has proliferated as lenders increasingly deal with borrowers through brokers and other intermediaries rather than having face-to-face relationships. 'Lending is becoming more anonymous,' says Rachel M. Dollar, a Santa Rosa, Calif., attorney."

"Borrowers' attorneys and other consumer advocates say many problems arise simply from greed or haste on the part of loan officers and brokers motivated by commissions to push for high volumes. 'The red flags were as strong as you can get,' says Jessica Attie, a staff attorney with the clinic's Foreclosure Prevention Project."

"Other lenders also appear to have overlooked some suspicious borrowing patterns. According to a mortgage-fraud indictment..one borrower, identified in the court filing only as Justin Z, obtained loans from National City Corp.'s mortgage arm to finance purchases of 20 condominiums in the Atlanta area between Feb. 1 and March 26, 2001."

The Sentinel and Enterprise from Massachusetts. "The state Division of Banks is cracking down this month on what it sees as abusive business practices by mortgage lenders and brokers."

"The mortgage industry's climate is somewhat muddled, Commissioner of Banks Steven Antonakes and some local lenders acknowledged. Some brokers and lenders offered many more atypical products during the recently concluded real-estate boom, according to Thomas J. Gray, senior vice president of lending at Workers' Credit Union."

"'In the mortgage business, because it's cyclical, when the real-estate market is going up, there are some mortgage companies and brokers that would make loans they might not normally make and (then sell the loans to other lenders),' he said. The real-estate market's slowdown negatively impacts homeowners struggling to keep up with a loan's payments because they can't quickly sell their home to avoid foreclosure, Gray explained."

"But the slowdown has also put lenders in a tough position, said Christopher J. Iosua, president of the Mortgage Connection Inc. 'When business slows down the way it has in the past six to nine months, new loan originators and those without a strong base of customers do things they probably wouldn't normally do,' he said."

"Commissioner Antonakes said, abusive lending practices can destabilize the entire real-estate market. 'In the worst case, the home will be foreclosed upon, and that kind of activity could result in the home being sold for less than its value and before you know it, you have a domino effect.'"

The Oregonian. "It seems like every month, I'm running into people passing out a slick new business card that announces them as a real estate agent or mortgage broker. On certain Portland streets, housing prices are doubling in a matter of months. And when there's this kind of temptation to make quick money, greed can't be far behind."

"Last week, Leanne Booth, a real-estate loan broker; Troy Martin, a real estate sales agent; and Ryan Bonneau, a former mortgage loan originator, were indicted on money laundering and wire fraud charges. They are accused of selling two Marine Drive homes at inflated prices so they could pocket the profits."

"One house was sold at about $100,000 more than its $350,000 market value. The other, next door, sold for $50,000 more than its $350,000 value. The biggest loser is the Indianapolis bank that loaned the money. And once the real-estate market bottoms out, the dominoes of loan defaults that will likely result will reveal even more mortgage fraud cases, says Lance Caldwell, one of Portland's assistant U.S. district attorneys."

"'It reminds me,' Caldwell says, 'of the savings and loan crisis.'"