Beginning in 2008, mortgage companies had begun to start making loans to individuals as a way to promote home ownership. With the help of Fannie Mae and Freddie Mac, there was increased pressure on these mortgage companies to loan to individuals who did not meet certain requirements that would qualify them. For obvious reasons, these qualifications were in place so that a crisis like this would have never happened. Additionally, the mortgage backed securities and collateralized debt obligations attracted investors due to their high return on investment because of the higher interest rates charged to the mortgagor. When these subprime mortgages had defaulted, both the mortgage/lending and the investing sector crashed which led to the nations recession.
As a result of the subprime mortgage crisis, mortgage loan originations have been at their lowest level since 2001. This is due to the tighter requirements needed to qualify individuals for mortgage loans. However on the other hand, foreclosure and delinquencies have increased enormously which, as an extension, has resulted in an increase in mortgage fraud aimed at distressed homeowners. However, as of 2010 the majority of the prevalent schemes per FBI Cases open were Loan Origination Schemes, followed by Title Escrow Settlement fraud, then Real Estate Investment, Short Sale, Commercial Real Estate Loan Fraud, and a few other categories.
Loan Origination Schemes are divided into two main categories: fraud for property/housing and fraud for profit. Fraud for property is what most of us think of when we think of mortgage fraud. It involves applicant’s misrepresentation in their qualifications when purchasing their primary residence. The difference between the two lies with their intent. The applicant in a fraud for property have the intent of repaying the loan, their primary purpose was to get a loan when they were not qualified in the first place. On the other hand, fraud for profit is a more complex...
Please join StudyMode to read the full document