Is there a link between foreclosures, the hot housing market and fraud? Very much so, says Anthony Sanders, a professor of finance and real estate at the WP Carey School.

Once the housing market cools, he says, there is an increase in foreclosures, delinquencies and defaults of mortgage loans that have been based on fraudulent information. This is why as foreclosure rates have risen since 2002, the number of mortgage fraud cases under investigation by the FBI increased 237 percent. According to Sanders, there are two types of mortgage fraud: fraud for property, where a borrower misrepresents information in order to get a loan for a home to live in; and fraud for profit, which is structured almost like an elaborate Ponzi scheme with multiple loans and convoluted structures.

The hot housing market made it a lot easier to commit fraud. Put simply, the higher housing prices enticed more people to perpetrate fraud.

But Sanders does not believe that the Government should intervene and that the market will ultimately self-regulate. Maybe, but that means a lot of people will be hurt along the way, rightly or wrongly. Which means there will be no way the politicians would butt out.