FBI : Mortgage Fraud - New Analysis of a Rising Threat

FBI : Mortgage Fraud - New Analysis of a Rising Threat

Source : FBI

We’ve just released a comprehensive new report on mortgage fraud—now posted in full on this website. And, as you might expect given the downturn in the economy and all the troubles in the lending industry, it isn’t a pretty picture.

The information can get quite technical, with plenty of charts, graphs, and hard numbers. But we invite you to take a read if you’re interested in getting educated on the issue—and on emerging schemes that might impact your own pocketbook.

Among the key findings:

... Mortgage fraud is clearly on the rise. Although there is no central way to track the total extent of the problem, we received 46,717 Suspicious Activity Reports related to mortgage fraud last year—compared to 35,617 in 2006 and just 6,936 in 2003. Only seven percent of these reports documented an exact dollar amount in terms of losses, but even so, the total loss from this seven percent was $813 million. Our caseload has also escalated. By the end of fiscal year 2007, we were handling just over 1,200 mortgage fraud investigations—a 47 percent increase from 2006 and a whopping 176 percent increase from 2003.

... The downward trend in the housing market will continue (see forecasts provided by the Mortgage Bankers Association in the report), providing further incentive for shady real estate industry insiders to look for dishonest ways to turn a profit and growing opportunities for scam artists to prey on vulnerable homeowners.

... The subprime lending crisis is a contributing factor to mortgage fraud, both directly and indirectly. Subprime loans, designed for people with poor or limited credit histories, now represent more than 13 percent of all outstanding loans—double the percentage of five years ago. These high-interest, high-risk loans contributed to the 2.2 million foreclosures filed during 2007, up 75 percent from 2006. The trouble actually began when home prices were rising a few years ago, leading to relaxed lending practices throughout the industry and the exaggeration of assets by borrowers anxious to qualify for loans, both of which contributed to fraud.

... The top 10 hot spots nationwide for mortgage fraud in 2007, carefully mapped from multiple public and private sources, were: Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado, and Minnesota. The north-central region had the largest share of mortgage fraud, followed by the west and southeast regions.

.. The latest mortgage scams run the gamut: from “builder-bailout” schemes where developers unload excess inventory through financial trickery…to foreclosure rescue frauds that trick homeowners into signing over the deed to their house; from seller-assistance scams that use false appraisals to sell homes…to identity theft that leads to home equity credit lines being opened and drained. See the report for more details.

The report also briefly recounts our proactive response to the problem, including our participation in the Department of Justice's Mortgage Fraud Working Group, through which we are helping to identify large-scale industry insiders and criminal enterprises conducting systemic mortgage fraud...our work in multi-agency mortgage fraud task forces and working groups around the country...and our recent “Mortgage Fraud Summit” to discuss the issue with special agents nationwide.