Legal Loopholes and the Housing Crash

Banks found the ultimate loophole before the housing crash. They could approve

mortgages without checking if borrowers could pay — and it was completely legal.

Borrowers signed forms claiming their income was accurate. Banks stopped checking. Mortgage brokers

got paid per loan, not per quality. More approvals meant more money. Then banks sold

the risky loans, bundled them into securities, and passed them to investors.

Borrowers thought approval meant affordability. It didn’t. When housing prices stopped rising,

defaults exploded. Millions lost homes. Banks paid fines. No jail. Legal doesn’t mean

ethical. The scariest scams follow the law perfectly.