A model is constructed in which consumers and banks have incentives to fake the quality of collateral. Conventional central banking policy can exacerbate these problems, in that lower nominal interest rates make asset prices higher, which makes faking collateral more profitable, thus increasing haircuts and interest rate differentials. Central bank purchases of private mortgages can increase welfare by bypassing incentive problems associated with private banks, increasing asset prices, and relaxing collateral constraints. However, this may exacerbate incentive problems in the mortgage market.