Table of Contents
Mortgage Fraud Statistics4
Reports of Fraud5
Key players in a real estate & mortgage transaction 5-6 Factors for Mortgage Fraud7
The Fraud Triangle7
Common Mortgage Fraud Schemes8
Who are victims of mortgage fraud?9
How to avoid becoming a victim of Mortgage Fraud10
How to report fraud11
Mortgage Fraud Indictment 11-12
Since the housing market bust, there has been an explosion in the number of federal investigation of mortgage fraud scheme across the country. Mortgage Fraud is a violation of state and criminal statutes. Mortgage fraudsters include industry professionals and borrowers, they uses different schemes which are divided into two groups: Fraud for housing and fraud for profit. These will be discussed later. This paper explains the various types of mortgage fraud and the necessary steps needed to report if one has become victim of Mortgage Fraud.
According to the Federal Bureau of Investigation (FBI) mortgage fraud as a material misstatement, misrepresentation or omission relied on by an underwriter or lender to fund purchase or insecure a loan. In other words, it is a fraudulent practice used to obtain mortgage financing. It can be as simple as falsifying information to obtain the loan or to a more difficult scheme involving several parties with the intent of defrauding a financial institution and other parties of money through a mortgage loan. Mortgage Fraud has continue to increase due to poor economic conditions, liberal underwriting standards and declining house values. The FBI has reported that for the fiscal year ending Sept 30, 2010 there were $3.2 billion in losses from mortgage fraud. That’s a 16 percent increase in dollar losses from 2009, and a 117 percent increase from 2008. (www.fbi.org) Although there are many ways in which fraudster steal mortgage money, the schemes are often relatively straightforward. What makes mortgage fraud unique and difficult to both detect and investigate, is that it frequently involves several individuals in collusion. Based on the FBI’s 2010 Mortgage Fraud Report, mortgage fraud schemes are particularly resilient and they rapidly adapt to economic changes and modifications in lending practices.
Mortgage Fraud Statistics
The FBI reports that 26 states have significant mortgage fraud problems. The states with the highest reported cases of mortgage fraud are California, Colorado, Florida, Georgia, Illinois, Michigan, Missouri, Nevada, South Carolina, and Utah. Eighty to eighty-five percent of recent foreclosures are due to mortgage fraud. Estimated annual losses of $4 to $6 billion.
65 total FBO Mortgage Fraud Task Forces
More than 2,000 pending FBI mortgage fraud investigations as of February 2009 734 Cases opened in fiscal year 2008 compared to 295 in fiscal year 2003 80% of mortgage fraud involves industry insiders
Reports of Fraud
Federally regulated financial institutions are required to report incidents of suspicious activity to the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury through Suspicious Activity Reports (SAR). FinCEN then relays the reports to law enforcement agencies for investigation. (Perkins) Incidents of mortgage fraud or suspicious mortgage transactions are included in the SAR reports.
Key players in a real estate & mortgage transaction
There are numerous parties that are involved the real estate and mortgage process, any of whom can be involved in fraud. The functions of each party are described below. Seller and buyer/borrower – the buyer or borrower seeks financing in order to purchase a property from the seller. In a mortgage scam, either of these or both can be the perpetrator. Real estate agent- act for either the buyer or seller...