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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