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Rising mortgage fraud takes a toll on industry growth

Posted on: 14th Feb, 2006 02:37 am
The mortgage industry seems to be going through a lot of fraud cases these days. There is a potential risk of homebuyers and borrowers losing money at the hands of lenders involved in all kinds of frauds.

In the past two years, mortgage fraud cases have tripled to 21,994 and the dollar volume of these alleged crimes have quadrupled to $1.01 billion. Several mortgage companies are now coming forward to track such scams and frauds. Flipping and other forms of frauds are in recent times being spotted by companies who are involved in detecting such illegal lending practices.

These companies evaluate several documents related to mortgage transactions including refinancing in order to find out which organizations are engaged in frauds and scams. But this isn't enough. Along with fraud detecting companies, the common people should also come forward and expose the illegal practices going on in the industry. Their unpleasant experiences with such companies, if shared with others, will prevent borrowers from being cheated and misguided by the industry people.
Hi all,

Mortgage fraud is a big problem today in the industry. Several consumers are becoming victims to this cheap practice by some lenders and financial institutions.

Responsible organizations like the FBI are investigating into the matter and trying to go to the root of the problem.

Although the true level of mortgage fraud is not known as several cases in the industry are under reported, but with the available reports it is clear that mortgage fraud is growing.

As per recent FBI reports, 26 states are having serious mortgage fraud problems. Besides Georgia and Florida, nine states in the south and southwest, seven states in the west and five states in the mid-west are currently facing mortgage fraud problems.

Regards,
Blue
Posted on: 14th Feb, 2006 10:46 am
Reports are there for Mortgage Service Frauds. This is a case where the loans are manipulated by the lenders or lender's service provider to falsely point out that there is a default.

Troubles are created for the consumers with the charge that they are not making proper payments.

We all should help each other in identifying these fraudulent acts and prevent us from falling prey to these fake practices.

Thanks,
Angel
Posted on: 14th Feb, 2006 11:22 am
I would also like to share some information which I feel is required to grow awareness regarding frauds in mortgage.

The most highlighted mortgage frauds include - equity skimming, property flipping and mortgage related identity theft.

Equity skimming schemes involve the use of corporate shell companies, corporate identity theft and threat of bankruptcy/foreclosure to deceive homeowners and investors.

In property flipping properties are purchased and their value is artificially increased through false appraisals. This property is then purchased again and again for a higher price by associates of the flipper. This often increases the value of the property by 50 to 100% of their original value.

In identity theft, a person's information is used to commit various frauds including real estate and payment card frauds.

James
Posted on: 14th Feb, 2006 11:40 am
Yes there is need for awareness on the mortgage fraud where customers are overcharged and quoted fees in good faith estimate are raised considerably at the loan closings.

Hopefully we prevent ourselves from becoming victims to these kinds of activities through discussion and sharing our experiences.
Posted on: 14th Feb, 2006 12:12 pm
Ken,

Let me clarify the difference between mortgage fraud and bad business practices. It is not a crime to quote a fee and then change a fee. It has to be redisclosed if the variation between the quote and the final fee's effect APR by more than .125% and than can be done at closing. It is not fraud to disclose on the inital GFE a 1% Origination fee and then charge 2% at closing.......Is it a good business practice? NO it is not but it's not fraud.

While some of the thing mentioned above are major issues causing lenders and individuals millions the majority of true fraud occurs on stated income loans where mortgage brokers inflate income to make a loan ratio it is the most pervasive form of fraud in the mortgage industry today. It doesn't make headlines like the million dollar property flipping schemes etc.....but it occurs on probably 90% of the stated income loans that close.
Posted on: 15th Feb, 2006 05:35 pm
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