Mortgage fraud moving up the priority ladder for prosecutors
Mortgage industry professionals are facing increased scrutiny by federal prosecutors in Houston, Los Angeles, Phoenix, and New York, according to the Wall Street Journal. The FBI reports that 1,200 mortgage fraud cases are currently under investigation, compared with only 436 in 2003 and 818 in 2006. The Bureau wants to make it clear that mortgage fraud is a priority.
Last year, the FBI received over 35,000 reports of mortgage fraud, which totaled almost $1 billion in losses. This was over 5 times the number of reports in 2003. In 2006, there were 204 federal mortgage fraud convictions, which generated $388 million in restitution and $231 million in fines.
One target of state prosecutors is mortgage fraud in the “foreclosure rescue” arena. Investment firms offer individuals facing foreclosure the opportunity sell the house to the investment firm, which rents the property back to the original owner until she or he is in a position to buy it back. Unfortunately, many of the original owners end up evicted from the properties or the investment company secretly sells the house, effectively preventing a future buyback for the original owner.
The foreclosure rescue business is becoming more active as foreclosure rates are on the rise. Yet unscrupulous investment companies are designing the “rescue” to almost ensure failure on the part of the original property owner, and the consumer loses the property all together.
Tracy, how much of this recent mortgage fraud has to be laid at the doorstop of lenders who no longer perfrorm traditional due diligence on loans?
Well if you believe that those applying for mortgages should not commit fraud, none. Just because the mortgage company isn’t more aggressive in catching it, isn’t it still the responsibility of the applicant?
On the other hand, the lenders could do more and are doing more. I’ve got to believe that they’ve been very calculated in how much due diligence they do. It’s all about cost versus benefit, and I suspect that they’ve been doing just enough.
Tracy Coenen presents Mortgage fraud moving up the priority ladder for prosecutors posted at FRAUDfiles.