Sunday, December 14, 2008

Mortgage Fraud: Why It Affects Everyone

Mortgage fraud is a very serious problem. It’s a an even bigger problem with the current state of our economy. It affects even the innocent bystander.

The FBI somewhat recently released a report entitled, “2007 Mortgage Fraud Report,” which stated that mortgage fraud was up 176%. That’s a pretty big number. In fact, the report also reported that the FBI had instigated 1200 cases in which an individual “intentionally misrepresented information a lender used to fund a mortgage in the past year.” That’s very serious business. Just think - if it investigated 1200 cases, how many went undetected? The report further says that the number of mortgage fraud “Suspicious Activity Reports,” catapulted to a 31% increase in 2007. And according to the Mortgage Asset Research Institute, mortgage fraud increased nearly 50% in the second quarter of 2008 compared to last year. It’s scary.

Without a doubt, the subprime loans (that basically no longer exist in the old form) contributed to the increase in fraud. It was just too tempting for desperate or greedy people to lie about one’s income or forge a few docs to get into that home. Most of these individuals truly intended to pay back the loan. Life happened, and they figured out they couldn’t, and it was too late. You see, there are two types of fraud. There is fraud for home purchase and fraud for profit. Fraud for home purchase is usually an individual just wanting to get into a home they think they can afford, however, the lender wouldn’t agree with them if all the cards were on the table. And greedy lenders contribute to this mindset by turning a blind eye to information they probably should question. Fraud for profit is more complicated. It involves sometimes groups of individuals falsifying documents to obtain property and resell and drain the property, extracting all equity and saddling the lender with a mess. Fraud for profit sometimes includes appraisers, realtors and lenders.

Currently, there are three very popular mortgage schemes out there. The first one is the “buy and bail.” Lenders are particularly wary of this one. In this scenario, a homeowner applies for a cheaper mortgage than what they currently are financing. They then present a falsified rental agreement and fake renter for the property they currently can’t afford. They close on the new loan, then they default on the old mortgage. The borrower now has an new affordable mortgage, and the lender is stuck with a foreclosure on the old property.

The second type of fraud is the liar loan. Using technology, borrowers produce fake pay stubs, tax returns or income statements. Even the most careful and seasoned originators or underwriters can’t tell the difference.

And finally, there is the reverse appraisal mortgage fraud. In this scenario, lower than normal property valuations convince a bank that the property is worse less than what it is. The appraisal convinces the bank to do a short sale and settle for less than the mortgage owed.

So, how can fraud affect you? When properties sell at inflated prices and they’re in your neighborhood, your taxes increase unjustly. If they sell at deflated prices, than that effects your property’s value. Also, the properties in these schemes usually deteriorate quickly as no one is really maintaining them. Then, if you’re a neighbor, your property value decreases because you live near an unsightly house. And let’s not forget what the mortgage mess is doing to our current economy. I think we all feel that pain.

So, be on watch. This is serious business. And check your credit to make sure you’re not an identity theft victim. People with good credit scores are a big target for mortgage identity theft. You see, if you’re trying to scam a lender, it’s preferable to “be” Joe Smith with a 740 credit score than the deadbeat crook that you really are. Or worse yet, these thieves drain the real Joe Smith’s home equity line of credit by maximizing and withdrawing the limit. Yikes. Keep up your vigilance,and we lenders will do our part on our end. It takes a village.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at Home Loans Plain Talk.


RM_Apply said...

I was searching for some reference regarding this matter. Good thing I've found your article. Great insight.

Anonymous said...

Thаnkѕ , ӏ've just been searching for information approximately this topic for a long time and yours is the greatest I have discovered till now. However, what in regards to the bottom line? Are you sure about the supply?

Feel free to visit my blog post; bad credit loans uk

Anonymous said...

My spousе аnd I stumbled over heгe
dіfferent website and thought I shοuld checκ things оut.
I liκe what I see so i am just following you.
Look forward to lοoκing іntο your web
page for a ѕecοnd tіme.

Аlѕo visit my site: best Unsecured loan

Anonymous said...

I'm gone to tell my little brother, that he should also pay a quick visit this web-site on regular basis to take updated from most up-to-date information.

Take a look at my website; best homeowner loans

Anonymous said...

ӏt's very straightforward to find out any topic on net as compared to textbooks, as I found this content at this site.

My blog post best loans on the market

Anonymous said...

I have tο thаnk you for the effoгtѕ you've put in penning this blog. I'm hoρіng tο sеe the same high-gгаde content by yοu
in the future as well. In fact, your creative writіng abilities has еncouraged mе to get my own site now

my hοmeρаge - fast cash loans in 1 hour