Don't forget the mortgage scandal's low-hanging fruit

You can blame Countrywide, Goldman Sachs, and all the others - and you'd have a strong case. But the mortgage mess was also the result of misdeeds at the lower end - and it's been easier to prove criminal intent at this level than at the major financial institutions. That includes a retired Army sergeant named Michael Perry, who pleaded guilty to fraud in connection with a $3.4 million mortgage scheme in which he acted as "straw buyer." That's someone who falsified loan applications to qualify for mortgages. More than 200 people have been arrested in connection with such fraud since 2008. It's small scale, to be sure, but that doesn't excuse what happened. From the FT:

[Lanny Breuer, US assistant attorney-general for the criminal division], says the DoJ's record on combating mortgage fraud is "very good", adding that thousands of cases had been brought - including the straw-buyer cases. Committing these crimes required a booming property market, easy mortgage-lending standards, an estate agent to locate homes, and straw buyers with good credit. The straw buyers were usually in on the scheme, or recruited by others who promised to pay them. After filling out the applications - including false claims that they intended to live at the property, a requirement for a no-deposit mortgage - the estate agent or others involved would then buy the property, flip it and pocket the profit.

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Banks used the now-infamous "stated income" or "no doc" loans, where lenders did not confirm the borrower's employment or income. The scheme worked as long as the houses were sold before mortgage payments came due. But when the housing market cooled, the straw buyers were left with the mortgage and bad credit; they often ended up bankrupt. The banks were left holding the houses. The schemes played out across the US in the bubble years. Eleven people were charged with allegedly targeting oceanfront properties in New Jersey and Florida in a $15m scheme. More than 30 people were charged in a fraud scheme involving a gated community, known as the Versailles, in southern Florida. One mortgage broker, after learning about the federal investigation, allegedly hired a gunman and lured a straw buyer to a wood. Despite being shot many times, the straw buyer survived.