Update February 29, 2012: As of April 2010, the FBI reported 3,029 pending mortgage
fraud investigations compared to 102 in all of 2001.
The number of fraud investigations in 2009 reflected a 71%
increase over 2008 and a 131% increase over 2007.
Many industry experts have reported that misrepresentation
infects approximately 10% of all loan originations.
With loan originations of $1.96 trillion in 2008, that
translates to nearly $200 billion in mortgage loans that may have some level of
misrepresentation.
Error Loan – the
title company, appraiser, and mortgage originator all conspire in this scheme
to invent a ficticious property. When the lender pays out these individuals
make off with the money. When the lender attempts to foreclose, there is no
property to foreclose on and the lender is out the entire amount of the loan.
Identity Theft – Application
Fraud and Account Takeover
Account Takeover – occurs when someone steals an existing
account.
Application Fraud – occurs when the thief uses someone’s
information to open up a fraudulent account.
Straw Buyers –
someone who uses their information to allow another person to buy the property.
Fraudulent Flips –
buying a property out of foreclosure, claiming to do work on it, and then
selling it for an inflated cost (even though no improvements were made).
Seller Financing –
when the seller says they are giving a second mortgage to the buyer and then
walk away from the second mortgage (aka the soft second). Thank you to Peter Citera for the above information.
------------------------ The FBI has announced that reported mortgage fraud losses for 2005 exceeded $1 billion. The actual figure is $1,014,000,000, up from 429,000,000 in 2004. A Detroit home sold for $25,000 one day and $250,000 the next according to the FBI. Read about this egregious flip and other useful information on mortgage fraud posted by the FBI. Wayne
County backlog stretches gap period to as much as six months. Title
Insurers seek $150 increase in title insurance premiums to cover
losses. (At $30 per title order TINIX is a far more economical and
effective solution to gap losses.) Read more online at The Detroit News. Property
flipping may bring ex-appraiser 30 years. A former Belleville real
estate appraiser faces more than 30 years in federal prison after
pleading guilty to playing a key role in an $8 million real estate
scheme that defrauded a Jerseyville couple, among others. From the Belleville News-Democrat. |
