No. People who misrepresented themselves engaged in fraud. There is no requirement for the bank to assume bad faith on the part of the lender. If a bank made

No. People who misrepresented themselves engaged in fraud. There is no requirement for the bank to assume bad faith on the part of the lender. If a bank made a loan to someone who could not repay it, they are likely to take a loss. The fraud, where it happened, was when the bank sold this loan. At that point, the idea of 'willful blindness' and 'prudent man' came into play, when banks materially misrepresented the loans they were selling as having been prudently underwritten. But the victim was the buyer of the loan, not the borrower.