Mortgage Fraud Up 20% From Last Year. California Remains Near Top

Mortgage Fraud Has Sharply Risen

Although the housing market is struggling to move in an upward path, a new report released by Financial Crimes Enforcement shows that complaints over mortgage fraud have sharply risen from the same time frame one year ago. The report shows that, the five states receiving the highest reports of fraud by per capita during the third quarter happened in Hawaii, Nevada. California, Delaware and Florida.

19,934 suspicious reports of activity involving fraud of mortgage loans were filed by financial institutions during the three months ending Sept. 30, rising from 16,567 reports during the same time frame of 2010, in reports to FinCEN.

Almost 62% of the reports filed in the last quarter involved reposts of suspicious activity that started a minimum of four years previously. That figure stood at 24% for last year. The alleged fraud comes mostly from mortgage demands of repurchases and filings in the course of the real estate boom height.

The enforcement network concurs that of the 5,728 reports that were filed during the third quarter, around 29% of that total, comprised of activity that took place from October 2009 to September 2011. During January, President Obama publicized the creation of a task force for mortgage fraud with Eric Schneiderman, Attorney General of New York as the head.

The highest five counties with fraud reports comprised of Santa Clara County, Ca.; Honolulu; Orange County, Ca., San Bernardino County, Ca. plus Palm Beach County, Fl.

"As housing markets seek to recover, criminals persevere in their efforts of preying upon struggling homeowners, whereas financial institutions are continuing to uncover perceptible fraud as they continue working through their mortgage portfolios originated earlier, but now in default, James Freis FinCEN Director said. "FinCEN is continuing to monitor these fraud reports and is working closely with authorities to assist them in tracking illicit actors."

Don't be tricked by loan fraud

Here are some common rip-offs and the warning signs you should look out for in a real estate contract. Mortgage fraud is omnipresent: Annual losses are estimated to range from $4 to $6 billion as a consequence of

loan fraud, according from the FBI. Entire communities can be injured by loan fraud. Loan fraud can be a direct path to spikes in foreclosures, plummeting home values, and lenders increasing their fees and rates in order to recoup losses.

These crimes are often convoluted, entailing a number of people and happening over many transactions. To protect yourself, talk to your Realtor, educate yourself about loan fraud and be wary about warning signs when buying or selling real estate.

The Foreclosure Rescue Rip-Off

The Rip-Off: "Rescuer" promise cash-starved homeowners that they can keep their home out of foreclosure. The rescue, always consists of homeowners shelling out upfront fees, can have many faces, such as the "rescuer" obtaining a new mortgage on the homeowners behalf or by requesting the owner to sign the deed over to the home and then rent back until they can buy it back. Down the road, the homeowner loses the property, either by foreclosure or the phony rescue company.

Warning Signs: By means of foreclosure rescue programs, homeowners are often counseled to sign the deed to their homes to a phony third party, turn into tenants of their own home, not to get in touch with their lender, nor send any house payments to any other parties,

Loan Documentation Rip-Off

The Rip-Off: This swindle involves a number of frauds in which a prospective borrower supplies false financial records, such as their assets, income, employment status, and liabilities in order to be approved for a mortgage with more favorable lower rates and terms. Occupancy swindles are another fast expanding fraud: Borrowers claim they intend to occupy the home, although they actually plan on renting it.

Warning Signs Documentation may be suspicions if the address of the employer is listed as a P.O. Box, assets when correlated to the applicant's income seems too different, the new home is too small for the amount of stated occupants, the applicant's credit history is lacking, or the loan application is not signed or not dated.

Appraisal Rip-Off

The Rip-Off: An inflated appraisal .Stating a property has more value than it actually does. This is tied to numerous types of loan scams. It involves skewing or overstating comparable sales, property attributes or market values in order to acquire a higher valuation. A higher appraisal, which generates phony equity, is created by fabricate an appraisal record or employing an appraiser co-conspirator to obtain the inflated appraisal value.

Warning Signs: Be wary of an appraisal that is dated earlier than the date on the sales agreement, contain comparable sales that are dissimilar to the subject property or are not within the neighborhood, the seller is not the owner set out on the sales agreement or the deed, or a third person involved in the sale has ordered the appraisal.

Flipping Rip-Off

The Rip-Off: This involves buying properties and marketing them at increased prices. These frauds usually involve inflated appraisals and erroneous loan docs. The home is immediately refinanced or resold getting a new puffed up price. The property is sold at this inflated price, many times by a straw buyer who works along side the "flipper," and the property eventually goes into foreclosure.

Warning Signs: Key areas to be on lookout for are quick refinancing of the property; the seller has recently obtained title or is acquiring the title at the same time as the current transaction; a property which was in foreclosure just a short time ago now being acquired at a substantially lower price than the stated sale price; an appraisal that shows up too high; or the owner named on the title and appraisal do not match the name of the owner on the sales agreement.

Short Sales Rip-Off

The Rip-Off: Homeowners are upside down on the existing value of their property so they phony up a financial hardship and stop making their house payment. A co-conspirator of the homeowners then offers a low ball offer to buy the home by using a short sale. The existing lender then consents to a short sale, not being aware that it was pre-calculated. Subsequently after being acquired at the reduced amount, the home is then often sold again for profit at it's actual value.

Warning Signs: The borrower abruptly stops making mortgage payments with no lender workout discussions, an immediate purchase contract is submitted to the bank using a short sale offer, the short sale price being much less than actual market price, or a cash refund is tendered at close to the in arrears borrower (veiled as "repairs" or buyer credits, etc.) while not being disclosed to the lender   

Loan Modification Cons

The California Department of Real Estate (DRE) is telling homeowners. The DRE has issued a record amount of complaints against con artists who have offered to provide loan modifications and loan mortgage reprieve assistance.

Since 2008, DRE has started over 4,500 complaint cases involving loan modification complaints, along with 88 complaints against159 real estate licensees of violating California real estate laws connected with soliciting loan modification assistance.

One popular loan con: The guarantee of a mortgage modification by providing a fee upfront. Once a fee is given, the con artist does little if anything to secure a loan adjustment.

With so many homeowners facing financial difficulty, foreclosure assistance and loan modification cons are running rapant and homeowners need to be wary. Jeff Davi, DRE Commissioner. states "There are many variations of cons, but just about all of them involve collecting illegal fees in advance. If you are asked to pay money upfront, that raises a big red flag."

DRE is urging homeowners to circumvent being victimized by a con by never paying any fee for any loan modification services upfront and to be skeptical of assurances of "guaranteed modification. DRE suggests that homeowners contact a counseling agency approved by HUD, which can provide free loan modification services

FBI Renewing Push to Put a Stop to Mortgage Fraud

The FBI is renewing efforts to stop mortgage fraud. A spokesman said that the FBI is anticipating arresting hundreds in scheduled crackdowns during the coming weeks. Agents are expecting to find offenses ranging from schemes encouraging borrowers to falsify their earnings to scams relying on making false foreclosure information.

Mortgage Fraud.: Who's at Risk?

Arizona passed up California as the being state with the most risk of fraud. Nevada, California, Florida and Michigan were the top five states. The primary fraud is property valuation. Identity fraud and employment and income fraud risk have both increased. Occupancy fraud is down 11 percent as compared to the final quarter of last year, although analysts believe there may an upward trend as the inventory of shadow foreclosures are released on the market.

Report occurrences of suspected loan fraud to

New Article Mar 17, 2012

Real Estate Finance