Beazer's Just the Beginning

What's with the surprise? Sure, Beazer Homes (NYSE: BZH) is now reportedly under FBI investigation for possible fraud related to loans it brokered to help peddle its low-end homes.

The only thing that surprises me is that there aren't more stories breaking about possible mortgage fraud. Sure, as in any bubble, there have been reports of organized rings ripping people off through sophisticated frauds that victimize not only homeowners, but also lenders such as Countrywide Financial (NYSE: CFC).

But the kind of allegations in The Charlotte Observer against Beazer (i.e., unsuitable lending, light document falsification) get more to the core of what I believe will soon become another major leak in the housing bubble -- the unraveling of widespread, softer frauds.

The "Alt-A" biz has been a large proportion of recent home lending, and it is now trying hard not to follow subprime down the toilet. According to many reports, about 80% of Alt-A business is "stated income," commonly known as "liar loans."

Given that some research has found that 90% of those who take liar loans overstate their incomes by 5% or more, and that a stunning 60% tell major whoppers, overstating their incomes by 50% or more, Fools, I submit that we are only seeing a tiny slice of the fraud.

So while the pressmen grab their bats and commence beating on the usual culprits -- big business -- it takes two to lie on a loan form. Remember that a lot of those "victims" the media are trotting out are going to be getting exactly what they deserve.

Lie your way into more house than you can afford and you have no one to blame when things go bad, even if the real estate clerks and their wink-wink-nudge-nudge buddies in the appraisal biz didn't exactly do you a solid favor  by pushing you to buy high.

And heaven help us if our knee-jerk legislators step in to try to "help" those whose deceit and greed helped inflate the world's biggest asset bubble, putting home ownership out of reach for those hardworking families who would neither lie nor buy via the risky mortgage products that were the last gasp of "affordability."

A helping hand from Uncle Sam would only serve to prolong the pain, squeezing potential buyers and, ultimately, rewarding those financial giants whose slick financing greased the skids for the bubble, lenders like Washington Mutual (NYSE: WM) and HSBC Holdings (NYSE: HBC), and Wall Street enablers like Bear Stearns (NYSE: BSC)

At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Washington Mutual is an Income Investor recommendation. Fool rules are here.