I'm willing to bet there was a crookeder than average mortgage broker and some significant fraud involved. Some of the stories I've heard about how little things were being checked, it wouldn't be hard to set up a straw buyer to pick up a, let's say, $300K house for 700K. The straw buyer gets paid a chunk of change and walks away. The seller pockets the bank's cash and it looks fully legit on his end (until someone actually looks at it. If he gets audited or something, the deal's all right on paper.)