Monday, April 07, 2008
Mortgage brokers and lenders were reckless; this undermines consumer identity protection
An article by Gretchen Morgensen on the Business Page of the Sunday April 6 New York Times “A Road Not Taken By Lenders,” link here illustrates another flaw in our approach to consumer identity protection.
She points out that mortgage applicants have to supply and sign documents verifying income and allowing lenders to check incomes with the IRS. Yet, many lenders didn’t bother to check. Most had systems of sales quotas that encouraged looking the other way. Not only did they make loans to people who could not pay soon, they could have been encouraging security problems for some communities.
The point of the story is that there is a lot more due diligence that lenders can do to verify applicants, and this story (also available by Podcast on the New York Times website) does give some examples. They don’t do it because of the pressures of “extreme capitalism,” as professor David Callahan wrote in his 2004 book “The Cheating Culture.” It’s odd, when you hear so much about tenant checks and the qualifications to rent an apartment, in a society so biased toward “home ownership.”