Daily Real Estate News  |  March 14, 2008

Tough Markets Bring Fraud to Surface
Mortgage loan origination may have fallen to its lowest level since 2002, but mortgage fraud was on the rise in 2007, according to the Tenth Periodic Mortgage Fraud Case Report, prepared by the Mortgage Asset Research Institute.

Speaking at a MBA fraud conference in Chicago yesterday, Merle D. Sharick, vice president of sales for MARI, stated that Suspicious Activity Reports received by the Federal Bureau of Investigation and the Financial Crimes Enforcement Network from federally regulated banks jumped 139 percent between 2006 and 2007. The jump in fraud will spell record losses for lenders, easily topping $1 billion, says the report.

As it was in 2006, the most common types of mortgage fraud were misstatement about employment and income. However, borrowers’ failure to disclose debts, liens, and judgments grew by 50 percent in the last year.

Several factors contributed to the rise, says Sharick, including reduced loan volume that prompted lenders to more carefully scrutinize loans, falling home values, and an oversupply of properties, especially in markets such as Florida and Nevada where a significantly number of recent home purchasers were made by investors. (View a report and state breakdown of mortgage fraud by the Mortgage Asset Research Institute.)

In efforts to staunch the fraud flood, the Mortgage Bankers are developing a national mortgage fraud database so its members can share information on mortgage scams. The association also plans to develop a national database of property values.

— By Mariwyn Evans for REALTOR® magazine online