Someday, someone may sit down and write a long book about the hanky panky that has gone on in the sub-prime mortgage business in the last few years.  It&39;ll be a long book.

At last count the Implode-o-Meter showed 92 companies had imploded or were ailing.  Are there more to follow? Who knows, but the site would make interesting reading if it were not for the amount of suffering that these people caused, not all of which has yet come home to roost.

In the most recent news, a Vice President of a major homebuilder was fired for unauthorized shredding of documents.  Perhaps they would have showed that some of their activities were improper.  I have long suspected that homebuilder owned mortgage companies were particular susceptible to doing loans that "weren’t quite right" when the company had to close more houses to make the end-of-quarter statement look good.

Three now-former employees at Countrywide agreed to plead guilty to insider trading of the company&39;s stock and apparently the FBI has raided a Countrywide office to gather documents as part of an investigation, presumably into lending practices in the sub-prime area.

At New Century, which filed for bankruptcy, the SEC has upgraded their investigation to a more serious level. In addition, there is an investigation into accounting practices at the company.

I heard about a case today where the now-ex employees of a mortgage company were going into closed-loan files and changing the income on them so that when someone submitted a new refinance application on the same borrowers, the income on the new file correlated with what it was on the old file.

Obviously, there has been fraud at everyone connected with the sub-prime business, whether mortgagee broker, lender, or Wall Street firms that sold the mortgage-backed securities. My strongly held belief is that if it is going on at the higher levels of a company, it’s going on at lower levels too. Certainly not all employees are guilty, but there are probably plenty of blame to assign.

I chatted with the head attorney for the Department of Real Estate in California about consumer protection. He said that they are so busy with major fraud cases, they simply do not have enough manpower to look out for the individual consumer these days.  I don&39;t blame him or the legislature that funds them, but if you are a consumer, it does make you want to take extra precautions to protect yourself.

In case you think that you have been taken advantage of by some lender, I&39;d try Small Claim Court before I would complain to regulators. If, for example, you ended up paying your broker more compensation that was shown on your initial Good Faith Estimate, call the Manager at your lender first and ask for a refund. If you don’t get it, head for Court, and let me know how it turns out.

Finally, for an exhaustingly thorough discussion of what happens to sub-prime loans after they go to Wall Street, check out the article below.

Investment Landfill: How Professionals Dump Their Toxic Waste on You