Mortgage Fraud Reports Up 31 Percent In First Quarter Of 2011

Years have passed since the housing crisis first brought the U.S. economy to the brink, but reports of mortgage fraud are only increasing, up 31 percent in the first quarter of 2011, according to the Financial Crimes Enforcement Network, a Treasury bureau that tracks illegal financial activity.

In a report released Tuesday, FinCEN said that it had received 25,485 mortgage-loan fraud suspicious activity reports in the January-March period, up from 19,420 in the first quarter of 2010.

That’s not to say there were more instances of mortgage fraud in 2011’s first quarter. Most of the tips FinCEN received had to do with what the report calls “increasingly dated activities” -- incidents that happened in 2006 and 2007, during the housing boom, and that are only now being reported.

Only one day after the report's release, Ally Financial received subpoenas from investigators over charges of mortgage fraud.

“The industry is slowly making its way through the most problematic mortgages,” said FinCEN director James Freis in a statement.

Banks are under pressure to buy back the fraudulent loans. When the loans were first sold, the banks agreed to buy back any that turned out to involve fraud, a guarantee they made to protect bond insurers.

Those loans are coming under scrutiny now. According to FinCEN, what’s being uncovered are multiple incidents of “loan modification and foreclosure rescue scams, flopping, and falsified claims of identity theft.”

The FinCEN report notes that California had the most mortgage loan fraud subjects by volume, followed by Florida, New York, and Illinois, in that order. Of metropolitan areas, Los Angeles had the greatest number of fraud subjects by volume, followed by New York, Chicago, San Francisco, and Miami.

Californian metropolitan areas also dominated the rankings of fraud subjects per capita. San Jose topped that list, with San Francisco, Los Angeles, Riverside, and Sacramento rounding out the top five.

While the majority of activities referenced in the Q1 reports took place several years ago, and the financial sector has undergone a housing collapse since then, there’s no indication that mortgage fraud has decreased.

In August 2010, The Wall Street Journal reported that losses from mortgage fraud appeared to have risen 17 percent the previous year, and that $14 billion in loans were based on fraudulent data in 2009.

More recently, five major mortgage companies -- Wells Fargo, JP Morgan Chase, Citigroup, Bank of America, and Ally Financial -- came under federal audit in May for foreclosure abuse.

JPMorgan settled its case with a $153 million payment earlier this month, while Bank of America is said to have reached an $8.5 billion settlement of its own.

Comments

[Battling Cages]

08:16 AM on 07/04/2011

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[BonnieDoon]

04:50 PM on 06/30/2011

“It also casts doubt on the validity of already completed foreclosure sales in which lenders resold mortgages without recording the sales in county recorder offices. Many of those questionable transactions, including Flynn’s, involve the Mortgage Electronic Recording System….”

Yves Smith posted at Naked Capitalism 06/30/201:

“US Bank Halts Evictions in Oregon After Judge Reverses Foreclosure”

http://www.nakedcapitalism.com/2011/06/us-bank-halts-evictions-in-oregon-after-judge-reverses-foreclosure.html

[BonnieDoon]

05:03 PM on 06/30/2011

Smith quoted an article at The Oregonian by Brent Hunsberger:

http://www.oregonlive.com/business/index.ssf/2011/06/oregon_judge_voids_foreclosure.html

[Jacquel Chiraco]

04:24 PM on 06/30/2011

When all is said and done, the biggest mortgage fraud was committed by the lenders.

[Quetzalli]

02:56 PM on 06/30/2011

More notary fraud exposed:
http://www.wsbtv.com/video/28370944/index.html

[Realtors Are Liars]

11:55 PM on 06/29/2011

Realtors are neck deep in housing fraud.

[Carolab]

11:50 PM on 06/29/2011

AND?  Where is this LEADING?

[Tammy1126]

09:45 PM on 06/29/2011

...."JPMorgan settled its case with a $153 million payment earlier this month, while Bank of America is said to have reached an $8.5 billion settlement of its own....."

Well yay government. We all know none of the settlement will ever get to the people that lost their homes during this fraud epidemic so it's pure profit for government. Even the lawyers, judges, and investigators fee's were paid for by the taxpayers (including those that lost homes) so they got one heck of a deal didn't they?

[mary4]

10:11 PM on 06/29/2011

The 8.5 billion goes to the Investors, not us. The Investors sued the banks for not doing the proper paperwork to transfer the loans. The Investors thought that the Trustees were making sure all the terms of the transfer (PSA) were being met, they weren't.

The Investors know about the fraudulent docs that were used in the foreclosures, they know they were being charged by the Servicers for services that were not done. They know about everything but for some reason they don't want to mention the fact that they don't have the security, the Notes. They can't bring this up or we the people would realize they have no proof of the debt.

MERS was created as the vehicle to do all this transferring to the Trust/Investor, they didn't.
BofA wants this to go away so they are giving a token to the Investors to make this look all legitimate. The Investors want to believe they have the Security which they don't. They are willing to take this token, it's better than nothing which is what they have now.

I can only imagine what goes on in the Board Meetings.

[Jabawaba]

08:14 PM on 06/29/2011

The problem with the fraud situation is that the people who commit fraud get off with a small fine and a slap on the hand. They should lose everything they own and if that isn't enough to cover it, then they should lose their life. That would help solve the problem. This country has become one of criminals and who can screw the other guy the most to become wealthy. No wonder other countries hate Americans. I beginning to hate them too.

[mary4]

08:26 PM on 06/29/2011

Yes, a slap on the hand, what went so terribly wrong America.

[giwel7]

08:43 PM on 06/29/2011

thats only if they commit fraud on a large scale -small fine. if a bank exec commits fraud at a pharmacy for a handful of pills -jail time.

[redclaysreturn]

07:58 PM on 06/29/2011

One fund manager of note says we are in for another collapse because banks are still buying junk mtges. lessons arent being learned and we will have to bail the banks out again as early as next year.

[mary4]

08:14 PM on 06/29/2011

There is going to be a collapse. When people figure out what happened and that they are affected whether they are in trouble or not (65 million), that they can't buy or sell because of this, then everything is going to come to a screeching halt. This is what we are watching now.

[Michael Morrison]

07:43 PM on 06/29/2011

I keep hearing about thousands and thousands of mortgage fraud cases...Yet nobody ever seems to get prosecuted.

Something ain't right.

[2drunk2votein08]

08:04 PM on 06/29/2011

well most of them are rich,and we don't want to upset them.

[mary4]

08:37 PM on 06/29/2011

They dare not prosecute or people might start paying attention. They really don't want people to know that there is no way to fix this. They got away with the illegal foreclosures for years without the public catching on. Now people are starting to notice and they can't keep it a secret any longer. MSM is still not reporting but the info is online for anyone that wants to find out how twisted this is and if they are a homeowner they best be checking it out.

[ResearchtheFacts]

07:43 PM on 06/29/2011

The door is swinging both ways.  People are stopping paying their mortgage, saving the payments waiting for it to go into foreclosure, be sold auction, and they buy the house in cash for a fraction of what the mortgage once was.

[mary4]

08:00 PM on 06/29/2011

Even when the house is foreclosed on the title is clouded. The original owner is still the rightful owner. Hopefully those cash buyers don't buy a foreclosure. However, that may just work..buy your own house..yes, like that idea...lol.

[shughes2853]

07:18 PM on 06/29/2011

The fraud on the mortgages started at the top including Wall St and Fannie and Freddie. The deregulation was voted in by mostly republicans and John McCain was one of them onboard with it. As far as Fannie and Freddie - they did relax their guidelines and they most certainly were a part of that huge mess. The loans that were called "subprime" were the most awful loans ever underwritten and approved. I'm in the mortgage business and I can tell you the fraud did not originate at the local level. We were given guidelines and we followed them and I knew it was bad when I realized one day that people being turned down for credit cards could still get approved for a mortgage. It was ugly and the fallout will take another 5 to 10 years before we see the recovery from this horrifying mess that was created by greed, corruption and really crooked politicians.

[meanlady21]

07:32 PM on 06/29/2011

Two thumbs up!!!!!

[mary4]

07:38 PM on 06/29/2011

From another mortgage person, the fallout will take decades to fix. Every home will have to have a quiet title action done....there is no other way to fix this.

[jo ella]

07:11 PM on 06/29/2011

WERE any of you held at gunpoint and forced to take out loans YOU KNEW you probably wouldn't be able to pay???? YES banks do charge higher interests rates for those whose financial history look like they may be risky to loan to AND you can read a contract AND you can have a lawyer look at it.....banks do lose a lot of money on deadbeats!

[17ladyslippers]

07:15 PM on 06/29/2011

Investors in Mortgage Backed Securities lost a lot of money because of the fraud committed by banksters.

Sorry, jo jo. Most of the folks underwater and having mortgage problems today are not deadbeats.

[meanlady21]

07:34 PM on 06/29/2011

Your angrier than i am mean. Jo dearest read, learn, listen than speak with knowledge. God bless you.

[mary4]

08:17 PM on 06/29/2011

Well said. I would add, this is NOT a partison issue.

[lifeisalie]

07:02 PM on 06/29/2011

How is this for fraud. The government sets up a program to modify your loan. The bank tells you that if you miss three payments you will qualify. You miss the payments the bank tells you that you qualify then you start making the reduced payments. Three months later the bank informs you that you didn't qualify and that you need to make all your back payments plus fines or they will take your house.

Then once they take your house they sell it for whever they can get, because they have FDIC insurance on the house that pays off at 90% of the original loan plus any missed payments.

Most of these home loans were bundled up and sold off. After the taxpayer bailed these banks out the loans were sold off at 50 cents on the dollar. So on a 100,000 dollar loan all they have to do is sell it for whatever they want and then hit the taxpayer up again for the FDIC insurance and they make 40 grand. Four hundred grand if it's a million dollar house.

[mary4]

10:41 PM on 06/29/2011

And that doesn't even begin to explain the modification program....how many packages of paperwork the homeowner had to send because the documents were 'lost'. How many phone calls a day were made, never to get the same person twice. Then, at last, a modification approved, only to be followed by a denial a few days later. Then, approved again, making the 'trial payments' and getting a foreclosure notice posted on your door at the same time (duel tracking).

All this being done by a Servicer that does not have any interest at all in your loan. A Servicer that cannot legally modify anything. A Servicer that had no legal grounds to pursue a foreclosure because only the true owner of the debt (Note) can. Then the Servicer illegally forecloses with a complicit judge or sheriff, and lots of robo-signed documents.

Yes, those homes have been paid for several times, by TARP, Private Mortgage Insurance, FHA/HUD and everyone is suing everyone.

[bealebkk]

06:53 PM on 06/29/2011

More recently, five major mortgage companies -- Wells Fargo, JP Morgan Chase, Citigroup, Bank of America, and Ally Financial -- came under federal audit in May for foreclosure abuse.

JPMorgan settled its case with a $153 million payment earlier this month, while Bank of America is said to have reached an $8.5 billion settlement of its own.
What will it take for America to wake up...!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!