-Check their criminal background (some credit reports will show this, but others don't)-Verify their income (run the numbers in terms of their income, the rent you charge, their other current bills, etc.)

WARNING: HUD will prosecute false claims and statements.Conviction may result in criminal and/or civil penalties.(18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802)

What your loan officer is suggesting is loan fraud, which is criminal, forget about ethics.

While she might not get criminally prosecuted, in civil court you can imagine what some of the counter claims might be.  

@Allen Clark repeating what everybody said just call 911...someone please call 911 for these criminals!!! 

@Melissa SearingNo offense to the other guys in here saying not to set up a site...

In addition to the regulatory issues there is the very real possibility of criminal issues as well.

I've been told by one of my tenants that the city is where the criminals being released from California prisons end up.

They were very straightforward about the fact that the husband had a sex offense on his record (red-flag #2).

Some of what is being practiced could be pursued criminally.