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

[bayviking]

So, if they're little people, get them. But if they're a big COrporation dooing the same or worse, look the other way. That's how Washington works.

[Teritt]

...but financial institutions reported $1.4 billion lost in fiscal 2008. That's an increase of 83.4 percent over the previous fiscal year.....

So please tell me why they are fighting to return TARP money, paying huge bonuses to the fools that didn't put in safeguards and declaring themselves healthy?

[denny8844]

The Dems are firmly in control Congress and the WH and what are they doing to prevent this kind of thing? Well what are your boys doing about it Nothing why? because they are in the tank to the same monied interests that the Repubs were Wise up people Your Dems are no better than the other people

[Troubledwawa]

"Suspicious activity reports rose to 63,713 in fiscal year 2008, which ended last September, from 46,717 the year before."

Try reading the article.

[tck29]

He's right though. Despite the promises made during the election, the subsequent actions of our gov't reveal the democrats are simply republicans in everything but name. They are all beholden to big money...

[enoughalready13]

the system is crumbling right before our eyes ...
the first indication of this was not prosecuting the former administration for war crimes ...
it sends the signal that graft and greed are good and acceptable ...
thus we see this happening in every possible sector in our country ...

[FoonTheElder]

Quite a statment after 8 years of an administration that wanted to eliminate government regulation and enforcement. The Bush/Cheney administration hired political incompetents to run the agencies who were instructed not to enforce the rules & regulations.

Don't hire a President and Congress who want to eliminate government regulations and then expect those regulations to be enforced.

[xargaw]

Among lenders, the mortgage bankers have the least regulation, sell all their loans passing along all risk, and have long been the most ethically challenged. If you need a loan, go to a bank, credit union or S&L. You can still get in over your head if you aren't careful, but you cut your risk significantly. Twenty years in the appraisal business and we saw it all and saw it coming long long ago. Even the lowliest loan prosessor or clerk was privy to what was coming down the pike. The people in charge were making so much money, they didn't care what happened to consumers. The people at the top could have stopped this. These are the ones that should be indicted.

[MSaxe]

This article has no content at all. It's just a journalist's claims on very limited statistics. No who, what , when, where or why. An infant could have made this up.

Who is committing the fraud and when are they being indicted?

[FHTB]

Are you a mortgage broker? Any half-wit would know this is going on.

[satyriasis]

A family friend lost 3 grand to a mortgage modification scammer. Don't trust these people folks. They're liars and charlatans who helped to create this mess. They can't be trusted, I don't think anybody regulates them, let alone enforces the law when these pigs break it.

Our entire financial system is a sham. If reform even as moderate as Obama's doesn't pass I'll have no faith in our political system either. Not that there was much to begin with.

[FHTB]

Just dealt with a highly disreputable car dealership which was scamming the most vulnerable with outlandish promises, ridiculously high interest loans, bait and switch techniques and balloon payments...I told them, how on Earth could you scumb--gs continue to do the very s--t that ran the economy into the ground in the first place?

[ko2ko2]

you have a hard time paying your mortgage = walk away

Renting isn't that scary

[desertman]

The scary thing is that this mortgage market is 150% bigger than subprime. Unlike subprime, Alt-A loans typically have five-year resets - meaning, the interest rates adjust to higher rates. The Alt-A reset surge doesn't really get started until 2010! It continues through 2012.

You'll also see something called "option ARMs" on that chart. Even though the option Arm market is much smaller than the subprime market, it is also much riskier. An “option ARM” is a loan that allows the borrower to pay less than the total amount due from month to month. Whatever amount the borrower does not pay is added to the total loan amount…up to a pre-determined limit.

Obviously, loans like these are very easy to satisfy initially, but can become difficult or impossible if the borrower has been making token payments for a long time. What’s worse, these loans usually offered ultra-low teaser rates at inception, then re-set to higher fixed rates later on. The reset surge for these loans only starts in 2010.

You'll also see something called "jumbo prime." These are big loans - on average about $750,000. These were common in the most inflated bubble states, such as California and Florida, and were often made to poor credit risks. This is a market of $1-1.5 trillion - about as big as subprime.

[2tango]

In reality the Legal firms doing The Refis, and Modifications are the same Rufians that once were Deceived everybody with Exotic mortgages.

be aware folks, these Rufians are trying to keep their standard of living the way they had it during the Booming years.

[2tango]

there's nothing new about it

they individuals faking help true mail forms to call, or to fill up, similar to bankers originals.

offering refis/modifications etc. with an up-front fee, in other cases they even call in the phones to push for a fee, etc.

The problem is that the authorities know about it, and nobody is arrested.

[planetjeffy]

Straight Reuters and AP articles are crap.

That being said, I've read that we are totally understaffed
to enforce, investigate or prosecute all the mortgage fraud
that went on for the last 5 yrs, much less new fraud. Most of
these crook will get away scott free.

[Weathermaker]

Firefighters and insurance companies were saying the same thing for over a year now.

[wonketteRAWKS]

Didn't new laws protect against this? Details please.

[desertman]

Doesn't matter how many laws there are... In fact there are probably enough already... it's a matter of enforcement....

[sueinmn]

Please explain the fraud part so we are informed on how to avoid it!
Are there lenders or brokers offering loans, ordering appraisors in, collecting fees and then dropping you? We need detail!

[desertman]

Attempts to allow you to qualify even if you are a bad risk. Appraisals that come in to high.. etc.

[Locallogic]

And the exploitation continues....

[desertman]

renting is ok too. ownership not for everyone.

[not going2take it]

I bought a home that I could comfortably afford
and one that I could afford the realistic payments
over the entire time of the loan.

Those that cannot afford a home or eventually
really higher payments potentially are left with
options to rent. Very simple equation.

Not everyone can afford to own a home,
it simply is not within their means.
Sad but true.

My sorrow for those in trouble, is equally mixed
with the reality that we each face. People must
be realistic about their choices.