Mortgage Sluts: The extra-seedy side of subprime

Talking about the seedy side of subprime lending at the height of the bubble seems redundant -- like talking about Jeffrey Dahmer's dark side. But a piece in BusinessWeek looks at an especially sleazy side of the industry: "Dozens of former brokers and wholesalers say the trading of sexual favors was so common that it came to be expected."

Wholesalers reportedly offered loan underwriters sexual favors in exchange for approving questionable mortgage applications.

The scenes described in the piece sounds like something straight out of the movie Boiler Room: brokers sitting in the middle of an office shredding some documents and altering others in plain view of their supervisors and harassment and termination for anyone who protested the illegality.

While there were scattered lawsuits and reports of impropriety while all this was happening, no one really paid attention to it until after the music had stopped. A huge portion of the homeowners who are currently facing foreclosure participated in some form of mortgage fraud that was condoned by industry insiders.

In October of 2004, Chris Swecker, former FBI Assistant Director of the Criminal Investigation Division, told House Financial Services Subcommittee on Housing and Community Opportunity that "The potential impact of mortgage fraud on financial institutions and the stock market is clear. If fraudulent practices become systemic within the mortgage industry and mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market."

That's exactly what happened, but too much money was being made, and too many lap dances being given, for anyone to care.