The Mortgage Bankers Association (MBA) today released Mortgage Fraud: Strengthening Federal and State Mortgage Fraud Prevention Efforts, the latest addition to a series of policy papers sponsored by the trade organization. “We do not need more federal laws to combat fraud. Instead, we need a more coordinated effort and more resources to investigate and prosecute,” said Jonathan Kempner, MBA president and CEO. “In addition to being illegal and costly, we know that fraud has also contributed to the recent rise in delinquencies and foreclosures, and the industry and government must step up our anti-fraud efforts to help curtail these related problems.” The MBA paper sets out to separate the issue of mortgage fraud from predatory lending — a clear effort to assuage concerns from legislators on Capitol Hill, who are likely to see all fraudulent lending as predatory (and vice versa). The argument end up essentially splitting hairs, however; after all, fraud and predatory lending went hand-in-hand during the recent housing boom. Lenders were too busy making loans, and investors profiting from them, to worry about performing routine due diligence on a machine that was literally minting money — if it ain’t broke, don’t fix it ruled the day on Main Street and on Wall Street. And since very few investors and lenders were performing due diligence up front, predatory lending practices soared. For the MBA to come in with such a weak argument suggests it doesn’t believe it can win this battle — instead, it’s merely attempting to slow the oncoming freight train from Capitol Hill. And that might be a very good thing, not only for the industry, but for borrowers as well. I’m reminded here of a bit from comedian Lewis Black, who once riffed on the differences between Republicans and Democrats — “Republicans are the party of bad ideas, and Democrats are the party of no ideas.”

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