In: Economics
1. Money is being raised by the borrowers who would not have qualified for a mortgage loan. These people are desperate for a loan so they are raising money using fake documents. They are also able to pay off their loans and are not defaulting, but they are not disclosing from where the money is coming (i.e. the source of repayment).
2. Fake financial documents are used to raise money for people who do not fit the rule for getting a mortgage loan. These documents are passed by the system. Questions should have been raised at different stages, but were not raised. Maybe because of inefficiency or because of corruption.
3
a) Yes, accurate information is very important for the system to work. System is authorising the lending, so how can the system work woth accurate information.
b) If not, then these scams can repeat. So, solid accurate information is must to prove that the documents are fake at the source of it.
4
a) Regulation is very important.
b) Regulation will help to catch inefficiencies and corruption in the system.