The mortgage mania appears to have entered its Baroque phase sometime around 2004. That year, Countrywide approved a brokerage known as One Source Mortgage, Inc., owned by five-time felon Charles Mangold, which proceeded to embark on “rampant” fraud, Illinois says, including the wholesale doctoring of loan files.

But systemic corruption—and that is the right word—has been unveiled at lenders across the board. Two of the most revealing stories on the culture that overtook the lending industry were published early—February 4 and March 28, 2005—by the Los Angeles Times. Reporters Mike Hudson and E. Scott Reckard found court records and former employees who described the boiler-room culture that pervaded Ameriquest—hard-sell, scripted sales pitches, complete with the “art department” in Tampa. Ex-employees confirmed, as did Lisa Taylor, the loan agent quoted at the top of this story, that copies of Boiler Room, the movie about ethically challenged stockbrokers, was indeed passed around as an Ameriquest training tape.

[Ex-employees] described 10- and 12-hour days punctuated by ‘power hours’—nonstop cold-calling sessions to lists of prospects burdened with credit card bills; the goal was to persuade these people to roll their debts into new mortgages on their homes.

Power hours. And if the power-hour culture pervaded the market leaders, what of smaller lenders and mortgage brokers? Here is Glen Pizzolorusso, a young sales manager at WMC Mortgage, an upstate New York brokerage, who earned—get this—$75,000 to $100,000 a month:

What is that movie? Boiler Room? That’s what it’s like. I mean, it’s the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000 square feet. The ceilings were probably 25 or 30 feet high. The elevator had a big graffiti painting. Big open space. And it was awesome. We lived mortgage. That’s all we did. This deal, that deal. How we gonna get it funded? What’s the problem with this one? That’s all everyone’s talking about . . . 

We looked at loans. These people didn’t have a pot to piss in. They can barely make car payments and we’re giving them a 300, 400 thousand dollar house.

To business reporters of a certain age, boiler rooms are associated with the notorious stock swindlers of the late nineties—A. R. Baron, Stratton Oakmont—criminal enterprises all. But all the elements of the bucket shops of the past—the cold calling, the hard sell, the bamboozling of over-their-head civilians, not to mention the outright lying, forgery, and fraud in its purest form—were carried out on a massive scale and as a matter of corporate policy by name-brand lenders: IndyMac, Countrywide, Citi, Ameriquest.

“It got to the point where I literally got sick to my stomach,” a former New Century underwriter was quoted in Chain of Blame (Wiley, 2008), an early and strong effort at mortgage-crisis history by Paul Muolo and Matthew Padilla.

Of course, many individual borrowers knowingly inflated their incomes and otherwise participated in what would be their own undoing. And it is beyond question that a class of speculators took advantage of the loose lending environment and committed outright loan fraud to make leveraged bets on the housing market. Some say the borrower-shysters bear as much as 10 percent of the responsibility.

Let’s concede all that, because it’s true. My point is merely that a year into the credit crisis, the evidence is becoming overwhelming of a profound structural shift in the U.S. lending industry—one that institutionalized widespread deceptive practices and outright fraud perpetrated on borrowers. I think conservative critics of the so-called debt culture should at least factor this record into their thinking. As the business press is confronted with incredibly complex crises roiling the secondary market, it is important that this basic fact not get lost.

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014).

Follow Dean on Twitter: @deanstarkman.