This Doesn't Sound Good

Denver Post:

On an autumn day two years ago, Colorado issued a warrant to arrest Taiwan Lee, a state prisoner who had vanished on parole.

He hadn't gone far. While police looked for him, he bought three houses at inflated prices in Arapahoe County with the help of lenders who put up the entire $1.9 million.

After he was caught and jailed, he managed to buy two more. Until the foreclosures commenced, Lee owned five villas in an affluent gated community while living behind prison bars 150 miles away.

...

Critics say mortgage companies have little incentive to ferret out inflated sales because they bundle and resell their home loans to Wall Street investors, taking their profits and diluting fraud losses in large pools of mortgage-backed bonds.

These securities get "sold in little pieces all over the world," said Lou Barnes, a Colorado mortgage bank owner. "It makes it very difficult to figure out who, if anyone, bears any responsibility for the flow of Colorado's foreclosures."

Marc Loewenthal, a senior vice president of New Century Financial Corp., says his industry cares about the loans it sells.