Watching the deceptively gentle documentary When a House Is not a Home, produced by two residents of a historic Atlanta neighborhood ravaged by years of unchecked mortgage fraud financed by Bear Stearns and other loan securitizers, I wondered whether the correct charge would not be “apathetic,” but “pragmatic.” We don’t have street protest to speak of, but here in Zip 30310, which has seen more foreclosures than any neighborhood outside of Cleveland, residents got together to investigate exactly why it was that a third or more of the houses on their blocks sat empty, and why their tax assessments were rising based on implausible property values. They pored through county real estate records (the video instructs other citizens on how to work the spreadsheets), published and distributed a newspaper, organized regular meetings attended by elected officials, law enforcement, bankers, academics and others in a position to help, and weighed in to make sure that one of the worst perpetrators of the real estate schemes received the maximum possible prison sentence. Some of the participants in the video — including co-producer Brent Brewer and State Senator Vincent Fort — appear in my book.

The 30310 Mortgage Fraud Task Force won’t ever get AIG bonuses returned or stop Treasury from subsidizing speculation in bad assets, but it has accomplished something just as important in its own way. Its members have asserted ownership of their neighborhood, and proven that property values are not the only ones that count.

Well, FHA is now shaping up to be a pricey disaster, thanks to even more idiotic policy decisions that were supposed to help FHA compete with subprime. The Washington Post has an alarming story today about a surge in FHA loans that have recently gone into foreclosure without a single payment, a sure sign of fraud. HUD in the last couple of years has permitted FHA lenders to do direct marketing of loans (junk mail/telemarketing), insta-refinances for existing customers, and (ohmigod) cash out mortgages. Government-insured cash-out mortgages!! HUD might as well have been asking lenders to set up bogus deals. And this time around, the government is automatically on the hook for any losses the insurance fund can’t cover.

His message now is that the mortgage fraud that metastasized during the bubble is not only still with us; it may be getting worse than before, thanks to the burgeoning creativity of young hustlers like himself in the face of out-of-touch enforcers: “I actually had an FBI agent ask me ‘how in this market with all the changes is it even still possible to get cash back on a purchase’. Any FBI agent who has to ask that question, shouldn’t be involved in a mortgage fraud investigation, period.”  

Warren is likely exaggerating his case somewhat, in the apparent hope of having himself appointed mortgage fraud czar (”I am the man for the job, Chris Warren, have the management experience, the banking experience, and could assist in the oversight of the most major transformation of mortgage regulation without changing one guideline and still completely eliminate mortgage fraud and restore confidence in the American dream and the securities that that very dream provides for investors”). It would be nice to have him say some of this same things under oath sometime. But I won’t grade Warren down for poor grammar or worse morals — he’s got some worthwhile things to say.