One reason you may be in debt is because your part of the country was involved in a major mortgage scam: A study of home purchases during the real estate boom years in Chicago shows how one ethically murky–and sometimes illegal–tactic used to sell homes may have contributed to the housing crash.

The tactic was inflating the selling price of a home, but offering the buyer some incentive–often cash back–to accept the inflated price. The buyer could then use the cash-back for a mortgage down payment or other purposes. Between 2005 and 2008, up to 16% of home sales in Chicago were ones where the buyer borrowed more than 95% for the purchase, and they all had inflated prices of up to 9%. Highly leveraged home buyers–those who borrowed more than 80% of the home price–were 4% more likely to default on their loans in the first year alone if they engaged in one of these inflated-price deals.

This study suggests that artificially inflated housing prices were a significant issue in Chicago during the boom years, but economist Itzhak Ben-David thinks it was probably even worse elsewhere, and says, "I would guess that in places like Phoenix or parts of Florida, where the housing bubble was the worst, artificially inflated housing prices probably caused even more trouble."

And mortgage scams are still going on: US mortgage lenders vowed in March to end dubious foreclosure practices, but a new investigation shows that many are still taking the same shortcuts they promised to avoid, from a lack of investigation into potential borrowers to "robo-signers." These are bank employees who have signed thousands of legal documents that identify who owns a property.

These are the same people have been identified in previous depositions, court testimony and court rulings as having signed vast numbers of foreclosure documents that they never read or checked. So when home owners want to resell–or even to run away from their mortgage and let the bank foreclose–no one can tell who really owns the property.

Almost all borrowers facing foreclosure are behind on paying off their loans, and if foreclosure paperwork is faulty, homeowners can contest it.. In Yahoo News, Scot J. Paltrow quotes mortgage banker David Stevens as saying that "the real question is whether the servicer complied with all legal requirements. Families should be using every opportunity they can to protect their rights."

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