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Foreclosures Have Led to Proliferation of Mortgage Scams
March 30, 2010 | Leave a Comment
Foreclosures have led to a proliferation of mortgage scams and the government is pumping dollars into FBI, Justice Department, Secret Service and the Postal Service of USA to track down the culprits. The frauds have cost the borrowers as well as the industry huge losses to the tune of $15 billion to $25 billion. The numbers of such cases being handled by the FBI have been steadily climbing from 5,400 in 2002 to 25,000 in 2005 and a staggering 65,000 in 2008.
A yearly study is conducted by The mortgage Asset Research Institute on behalf of the mortgage Bankers Association on this problem. According to their report of 2009, nearly two thirds of the frauds are about false statements in applications. For example the borrowers lied about occupancy of the house. This falsehood helped borrowers to get a lower mortgage rate although it is in direct violation of the federal laws.
28% of the scams in 2008 were about intentional wrong financial and tax return information. Fake IRS filings can be easily made with software that is easily available. The documentation of the financial assets could also be managed. In 2008 nearly 21% of the false applications comprised of falsified deposit verifications.
Some of the cheats would go any lengths. They would even ‘rent’ bank deposits to those applying for loans to boost up their financial picture. The fee would start from $1,000 to enable one to become an owner (on paper) for a brief time of a real bank account that would be controlled by the firm renting out assets. The lender would then get a verification of the deposit in the name of the loan applicant without having any idea of the ‘renting’ scheme.
Fraudulent appraisers had also been part of the cheating scheme. They were involved in nearly 22% of the fraud related cases last year. The appraisers resorted to inflating valuation of the property to increase the loan sanction amount. This category is more difficult to locate because sometimes the increase is modest and thus avoids being noticed. Yet it is falsehood alright.
Employment papers were also faked and misinformation provided on closing or the escrow documents, credit reports and counts.
The maximum number of fraud related offences came from Rhode Island, Florida, Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado in descending order of number of cases. Maryland topped the list in false tax returns, while California Foreclosures had a high rate of incorrect verification of bank statements.
Conviction would lead to hefty fines and or jail.
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