Mortgage fraud up in U.S., but dips slightly in Florida
MIAMI – March 17, 2009 – Tighter underwriting standards weren't enough to deter consumers and crooks from submitting bogus mortgage applications in 2008. Reports of mortgage fraud rose by 26 percent nationwide compared to the prior year, the Mortgage Asset Research Institute reported Monday.
But unlike 2006 and 2007, when Florida led the nation in mortgage fraud, this year it fell to second place.
The overall increase in reported mortgage fraud can be attributed to a number of things -- more lenders reporting suspected fraud and more fraud being detected. But Denise James, who helped research and write the report, said brokers and other unscrupulous lending professionals were finding new ways to cheat the system.
Among the 50 states, tiny Rhode Island ranked first for loan fraud last year, with more than three times the amount of suspicious activity than might be considered normal relative to loan volume there. Illinois ranked third.
Lying on loan applications about income and debt was the most common type of fraud reported. In Florida, it accounted for 67 percent of complaints.
Nationwide reports of phony or exaggerated employment were also up, as were reports of inflated appraisals and falsified tax returns and bank statements.
Lenders are asked to submit reports to MARI's database only when a misstatement is considered "material," that is, when investigation reveals they would have made a different decision about funding a loan had they known the truth.
Esteban Reyes of Verification Bureau, a Miami-based fraud prevention services company, said criminals with established operations continued to commit mortgage crimes, although far more lenders are stepping up efforts to verify information submitted by applicants.
Still, the Treasury Department estimates that the cost of mortgage fraud to the industry could reach as high as $25 billion for 2008.
While the usual schemes are still around, MARI noted a new wave of fraud emerging, including foreclosure rescue fraud and identity theft targeting the elderly and non-English speakers.
Copyright © 2009, The Miami Herald, Monica Hatcher. Distributed by McClatchy-Tribune Information Services.
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