Mortgage Fraud Rampant And Growing: FBI

WASHINGTON (AP) -- Falling housing prices are driving up reports of mortgage fraud, with the FBI saying Tuesday that reported losses are up 83 percent last year and climbing even higher in 2009.

In its 2008 Mortgage Fraud Report, the Federal Bureau of Investigation said the downturn in the economy, a spike in foreclosures and defaults and diminishing credit availability "fueled a rampant mortgage fraud climate fraught with opportunistic participants desperate to maintain or increase their current standard of living."

"Industry employees sought to maintain the high standard of living they enjoyed during the boom years of the real estate market and overextended mortgage holders were often desperate to reduce or eliminate their bloated mortgage payments," the report said.

The FBI considers two types of mortgage fraud. Fraud for property involves an applicant making misstatements like embellishing income and concealing debt to get a loan. The second type, fraud for profit, is a bigger problem with elaborate schemes involving falsified appraisals and loan documents and techniques like straw buyers, identity theft and shell companies.

The FBI says victims include borrowers, the mortgage industry and neighbors who ultimately lose housing value.

The report, which collects data from law enforcement, the mortgage industry and other government agencies, said the number of suspected mortgage fraud reports increased a third to 63,713 in fiscal 2008, up from 46,717 the previous year.

The report says the precise losses are unknown, but financial institutions reported $1.4 billion lost in fiscal 2008. That's an increase of 83.4 percent over the previous fiscal year, and yet the reported losses are still on the rise in the first half of the current fiscal year by $208 million more than the first six months last year.

"The downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate," the report said. "Several of these schemes have the potential to spread if the current economic downward trend, as expected, continues into 2009 and beyond."

Nearly two-thirds of the pending FBI mortgage fraud investigations last year involved losses of more than $1 million. The western United States had the most FBI investigations, with the top 10 states being California, Illinois, Texas, Georgia, Ohio, Colorado, Maryland, Florida, Missouri, and New York.

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Comments

[PrayingforReagan]

Well according to a Congressional Report released this week, the cause of the housing crisis was in fact.......

Fannie Mae and Freddie Mac.........

Federal Government Was Culprit in Housing and Economic Crisis, Says Congressional Report
Wednesday, July 08, 2009
By Fred Lucas, Staff Writer

The report cites Frank’s accusations that to blame Fannie and Freddie is to blame only the lender and not the borrower.

“This misses the mark entirely. In fact, responsibility for the erosion of mortgage lending standards, which began with government affordable housing policy, rests squarely on the policy makers who advocated these ill-conceived policies in the first place,” the report says. “Borrowers quite naturally responded to the incentives they were given, irrespective of their socioeconomic status, and risky lending spread to the wider mortgage market.”

http://cnsnews.com/public/content/article.aspx?RsrcID=50680

[pastpartisan]

Stimulus is a joke of a concept; it doesn't end up with real economic growth in the long
tem. Even the New Deal failed to increase private investment. It wasn't until 1941 that
domestic private investment reached 1929 levels. The fact that the first stimulus has failed
to stop the bleeding yet isn't surprising. Our government deficit for the year which is over
20% of GDP (when the omnibus bill, first stimulus, bailouts, and on-budget deficit are
summed) is unsustainable and something's gotta give, whether it be the lenders or the
interest rates.

hat tip to http://www.iamned.com

[DestinationsUnknown]

TOXIC COMMERCIAL REAL ESTATE- Morgan Stanley Real Estate

No BAILOUT for 'TOXIC REIT' Ponzi scams.

IN 2007,according to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.

FORT WORTH, Texas--BUSINESS WIRE--Feb. 13, 1998--Crescent Real Estate Equities Company (NYSE:CEI), one of the country's largest real estate investment trusts, today announced that it has completed the sale of 8 million shares of 6.75% Series A Convertible Cumulative Preferred Shares to Salomon Smith Barney. The offering generated...

April 21, 1998 Crescent Real Estate Equities Announces New Earnings Release Date
Explain this sale on May 22, 2007:Crescent Real Estate Equities Co. (NYSE: CEI)

Morgan Stanley Real Estate has agreed to acquire the Fort Worth, Texas-based REIT for a deal that totals $6.5 billion, including the assumption of debt.

Morgan Stanley Plans to Turn Downgraded Loan CDO into AAA Bonds
July 8 (Bloomberg) -- Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody"s Investors Service,

[DCX2]

This is new, right? I could have sworn that I remember reading about rampant fraud last year...

[rubrik r]

The Mortgage Insurance Companies of America, a trade group, said 87,904 insured borrowers were at least 60 days late on payments in May, up 8 percent from April and up 29 percent from a year earlier. Late payments often foreshadow foreclosure.

Mortgages brought up to date totaled just 52,590, down 10 percent from April and the fewest since January. But so-called insurance cures were up 29 percent from a year earlier.

I think Private mortgage insurance lets people buy homes with down payments of less than 20 percent, and guarantees that lenders will be repaid even if borrowers default.

Foreclosures as a result are on the rise coupled with the high rate of unemployment.

I think the situation would deteriorate even further since

* Massive Job losses
* There Is No Demand
* Since May, Mortgage Rates Have Gone Up
* Too Much Supply
* Option ARM – The Next Wave of Default
* Market Psychology

Recently read an article on a similar premise.

http://www.housingnewslive.com/is-the-housing-market-recovering.php


Check out http://www.housingnewslive.com/blog.php

[pastpartisan]

just let the banks fail. Seriously, thats the only way they will learn.

hat tip to http://www.alexandria.lib.va.us/link/redir.pxe?www.iamned.com

[eladora]

It didnt matter how many times you called HUD or the local authorities , no one ever listened. They have complicated forms for consumers to fill out , and many consumers dont have the stamina to go thru the complex complaint process so they just walk away. Then the ruling agency--and that has been a huge part of the problem , states says fed, local authorities say state, --doesnt do anything for years.
To act like these are big busts now is so disingenious. It takes years for these to go thru the system and then charges are milked down anyway. Much of the fraud could have been stopped and at the very least slowed , if only agencies would have acted sooner. The fraud today is because of the stupid stupid claims that mortgages can be refied easily under the stimulus plan. If the agencies were serious they would go after these scammers starting with the advertisements they run, but they wont. They wait until consumers are hurt beyond repair.

[mjtaylor22]

THESE AGANCIES WERE UNDER REPUBLICAN CONTROL, they do not believe in government
what did you expect responsible gavernanace

[ejhickey]

Why are some individual home buyers so desperate to buy an asset that may drop in price? Buying real estate used to be a way to build wealth but now the reverse is true. Yes prices look cheap compared to the inflated values of 2-3 years ago.

Much of the potential fraud could be reduced simply by requiring 20% down for the purchase of any home and that the buyers have had the down payment in their bank for at least 6 months prior to the sales contract date.

[cognitivereddawn]

Old news. Representative Dorgan of North Dakota has been warning everyone since the crisis began. If the republican politicians won't participate in President Obaman's programs, why won't they use their time to corral lending fraud? How are they profiting from not fixing these broken laws?

[chasmader]

I'm a Real Estate broker and sadly, this is not news.

[Furby]

You come here for news?

[OC4Obama4Pres]

Don't mind Furby.

[outnow]

Many of the lenders shut down their fraud units because the guilty finger pointed back to their own company employees assisting borrowers in the fraud. Not only were the lenders guilty of predatory lending regarding the terms and interest rates, but they were well-aware of the scam. Identity theft was also rampant along with falsifying income documentation and statements Appraisals were inflated upwards.

Loan brokers were "independent" so that there was some distance between the "figures" and the lenders. The banks too busy making commissions and were bundling these mortgage-backed assets and removing much of the risk from their balance sheets while making big fees upfront.

The GSEs were loaded up with bad debt but had implicit guarantees. (semi-automatic bailouts).

The real estate asset bubble was pushed by "easy" (sleezy) credit conditions, low, no or even 125%and low interest rates by the Fed. Plus you could get negative amortazation and cash off the top when closing.

The question is why the FBI stood down. Local district attorneys were not interested in prosecuting fraudulent mortgage cases. The rating agencies were crucial, too.

[jsgaetano]

But... conservatives told us the industry could self-regulate!

[outnow]

So did a lot of Democrats, unfortunately.

[OC4Obama4Pres]

Yes, but ALL conservatives. Remember, all Repubs are conservatives. Some Dems are.

[den1953]

Even a 2 year old knows they can't have something if there told you can't, the bank's are as much to blame as the people who can't afford house's they can't pay for.

[Antifascist-08]

After 8 years of the "anything goes" mentality, what would one expect.

We live in a country that has turned criminal in the pursuit of of wealth and power. Yes, it was bad before, but unbridled greed without any regulation has tipped us completely into a banana republic mentality.

[ghudson68]

Desperation is a powerful force to be reckoned with during economic hardship. The conversation could easily lead to a 'chicken or the egg' argument. I doubt the problem is solved very quickly.