Ethically murky tactic may have contributed.

• Position: Housing Bubble - Brief article

One ethically murky--and perhaps illegal--tactic used to sell homes during the real estate boom years probably contributed to the housing crash, suggests a study published in American Economic Journal. 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 then could use that cash for a mortgage down payment or other purposes.

Between 2005-08, up to 16% of home sales where the buyer borrowed more than 95% for the purchase had inflated prices of up to nine percent. Many of these transactions occurred in low--income neighborhoods. They helped people buy homes that they probably could not have purchased otherwise, indicates Itzhak David, author of the study.

"Without these kinds of transactions, many buyers would have no means of purchasing a house, and sellers may not have been able to sell their houses. In many cases, it was a type of mortgage fraud. There are worse types of fraud, but this is still fraud."

Illegal fraud occurs when...