Don’t give in to temptation: Mortgage fraud on the rise

There’s no getting around the fact that qualifying for a mortgage has become more difficult. Although most home buyers accept their mortgage fate handed to them by underwriters, some are tempted to embellish their mortgage application so as to appear more qualified to receive a loan. Even though you may be tempted to cross over the line, don’t give in to temptation just to buy a home.

If you think that mortgage fraud is only about taking part in some elaborate conspiracy with others for financial gain – think again. “Fraud for profit” typically involves “Gross misrepresentations concerning appraisals and loan documents…”; and is one of two categories of mortgage fraud described by the Federal Bureau of Investigation’s latest mortgage fraud report, titled “2009 Mortgage Fraud Report ‘Year in Review’”(

The other category is “Fraud for property;” and entails the exaggeration of personal information that is included in a mortgage application (including providing false supporting documents) to buy a home. If you think that fudging a little on your mortgage application won’t hurt anyone because you intend to repay the loan, think again. The FBI states that mortgage fraud “is a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan…”

Since the FBI reports that the usual suspects perpetrating mortgage fraud are typically “industry insiders” (such as lenders, appraisers, underwriters, real estate agents, settlement attorneys, etc.), it is possible that your loan officer or real estate agent might attempt to “recruit” you to be a participant or victim of mortgage loan origination fraud. Mortgage loan origination fraud involves falsifying a borrower’s information to increase the likelihood of qualifying. Besides falsifying information such as bank statements, W-2 forms, and tax returns; mortgage origination fraud could also include the use of a false identification, false asset rentals, backward applications, and the use of credit enhancement schemes.

Additionally, affinity fraud is reportedly a growing issue, such that co-conspirators are often recruited within the same ethnic group or gang. Although, affinity fraud could be an element of any mortgage fraud scheme, it is sometimes devised to launder money.

To alert consumers, the FBI’s mortgage fraud report also cites emerging trends. The list includes schemes such as commercial mortgage loan fraud, condominium conversion fraud, bankruptcy fraud, foreclosed property theft/fraudulent leasing, tax-related fraud, the resurgence of debt elimination/redemption schemes, first time homebuyer tax credit schemes, and flopping/short sale fraud (fraudulently lowering the value of a distressed property).

The FBI’s assessment is that mortgage fraud activity is likely to persist due to continued poor economic indicators (including employment and housing). The environment is not only ripe for perpetrators to implement the typical mortgage frauds (such as loan origination fraud); they are also devising new ways to circumvent mortgage guidelines and laws for personal gain. The FBI states that detecting fraud can sometimes lags behind industry indicators for up to two years, so increased fraud reporting efforts will not indicate any immediate changes.

Don’t let your desire for the American Dream turn into a nightmare. If you suspect that you are a victim or are being recruited for mortgage fraud, file a report with the local FBI field office. Additional resources are offered by the Financial Fraud Enforcement Task Force website,; including how to report suspected mortgage fraud.

By Dan Krell
Copyright © 2011

Original published at

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws.

Feds to crack down on foreclosure relief scams

The 2008 Mortgage Fraud Report “Year in Review” published by the Federal Bureau of Investigation reports that mortgage fraud continues to increase ( Maryland, DC and Virginia are in the top ten states hardest hit by mortgage fraud. Due to a declining real estate market, the FBI states that incidents of mortgage relief scams will continue to rise through this year and is expected to increase in the future. Property flipping, short sales, and foreclosure rescues continue to be the main schemes perpetuated; however, new forms of the scams are appearing as reverse mortgage fraud, credit enhancements, condo conversions, pump and pay and loan modifications.

In an effort to cut down on mortgage relief scams, the Federal Trade Commission ( is launching an initiative to educate consumers and prosecute those allegedly involved in defrauding home owners. In a press release dated July 15th the FTC announced the launch of “Real People, Real Stories,” as well as four law suits involving foreclosure relief deception (there have been a total of fourteen such cases since April!).

“Real People, Real Stories” is a video that will educate home owners on foreclosure relief scams and deceptive practices. Actual home owners who were deceived by scammers were interviewed for the video; they divulge and expose how the scammers approached them and operated. The video advises home owners to investigate anyone offering a foreclosure relief program. Home owners are also warned that many foreclosure relief programs have the words “federal,” “U.S.” or “government” in the name, but in reality may not be associated with a government entity.

The video is also a promotion for the Hope Now alliance ( Hope Now is a partnership of lenders, non-profit organizations, and other mortgage industry participants who are dedicated to offering a coordinated plan to assist home owners.

Operation Loan Lies is a nationally coordinated law enforcement effort to put an end to mortgage relief scams. Actions taken by 25 federal and state agencies are directed toward those who “deceptively marketed foreclosure rescue and mortgage modification services.” FTC Chairman Jon Leibowitz was quoted in the press release as saying; “These con artists see the high foreclosure rates as an opportunity to prey on people in distress…”

Alleged actions by targeted foreclosure relief companies across the country include (but is not limited to) false claims of services, experience and success rates, violating (state) laws prohibiting collecting fees prior to providing services (some up to $5,500), “Do-Not-Call” violations, and misrepresentation.

If you or someone you know is facing financial challenges or foreclosure, Hope Now can connect you to HUD certified counseling agencies. Hope Now resources include instructions on contacting lenders as well as a lender contact list, local counseling agencies, and government agencies. Hope Now also offers a hotline so homeowners can call toll free, 1-888-995-HOPE.

Don’t become another statistic, investigate anyone that offers you foreclosure relief by calling Hope Now as well as local consumer protection agencies (such as the Maryland Attorney General Office Consumer Protection Division, and the Montgomery County Office of Consumer Protection). If you suspect a foreclosure relief scam, the FTC would like your help by reporting such activity by calling 1-877-FTC-HELP; complaints are collected and given to federal and local law enforcement agencies.

By Dan Krell
Copyright © 2009

This column is not intended to provide nor should it be relied upon for legal and financial advice.

Don’t become a victim of a real estate crime

by Dan Krell © 2008

You might think that since the real estate market has slumped, incidents of real estate related crimes (including mortgage fraud) would have decreased also. However, the Federal Bureau of Investigation ( reports that “mortgage fraud continues to be an escalating problem in the United States.” Real estate related scams are a common form of white collar crime that is constantly being investigated by the FBI and the office of the Maryland Attorney General (

Maryland has been a hot spot for real estate related scams and mortgage fraud for years. In fact, the FBI included Maryland in the “top 10 mortgage fraud states” as reported by the 2007 mortgage fraud report, and rated within the top 5 states by the Mortgage Asset Research Institute’s Quarterly Fraud Report for the first quarter of 2008 ( Among mortgage fraud types, Maryland ranked first in “tax return and/or financial statement misrepresentation.”

Additionally, Baltimore City seemed to be ground zero for mortgage fraud during the flipping scams of the 1990’s; but through coordinated efforts of many agencies, including HUD, FBI and the Maryland Attorney General, the incidences of real estate scams and mortgage fraud decreased significantly. However, law enforcement was not the only intervention; the Greater Baltimore Board of Realtors (GBBR) assisted in the reduction real estate related fraud activities due to a massive campaign to educate the public called, “Know Real Estate Fraud When You Hear It.”

Real estate related scams vary, but often include theft, fraud, and ponzi schemes. Earlier this year, the Washington Post (Wiggins, Ovetta. “Home Builders, Broker Charged With Theft” October 10, 2008; B02) reported on a local builder and mortgage broker who were charged in theft of $1 million for new homes that were never built in Prince Georges County. Along with mortgages, buyers allegedly lost large deposits for homes which were never built. Such complaints against home builders are common enough that the Maryland Attorney General office of Consumer Protection published a handbook called, “Buying a New Home; Consumer Rights and Remedies under Maryland Law.”

Another scheme to defraud consumers is illustrated by the demise of the Metropolitan Money Store. This local company promised to help home owners facing foreclosure along with credit repair and other mortgage related activities. In mortgage fraud schemes, defendants (presently being prosecuted) were accused of (among other things) stripping bulk equity of home owner’s proceeds, not making mortgage payments, and the use of straw buyers which resulted in charges to some of wire fraud, mail fraud and money laundering for their “foreclosure reversal scheme” (

Ponzi schemes are more prevalent and local than you might think. Earlier this year, a Baltimore man was sentenced to 188 months in prison arising from a twenty-seven counts of wire and mail fraud. His scheme promised high returns to investors from short term purchase money loans to home buyers and refinance loans to home owners. New investments were alleged to pay previous investors.

As many home owners and home buyers become desperate for solutions, they become targets of schemers. The saying that “if it sounds too good to be true, it probably is” holds true. If you are approached by someone offering you a solution to your real estate problems, do your due diligence and don’t become a statistic!

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 15, 2008. Copyright © 2008 Dan Krell.

Identity Theft can lead to a stolen home

by Dan Krell

Identity theft and mortgage fraud continue to plague the nation; both crimes are an ongoing concern for law enforcement. Earlier this year, the Federal Bureau of Investigation ( reported that these types of crimes were increasing, as well as a new disturbing trend in real estate related crimes called “house stealing.”

You may have heard of identity theft; but maybe you did not know that once a perpetrator steals your identity, they can defraud others in many ways. The Federal Trade Commission ( states that besides unauthorized use of your credit cards, perpetrators can use your information to get jobs, healthcare services, social services, and open new accounts (including mortgages, utilities and credit cards).

In January, the FBI reported that there were over 1,200 open cases of mortgage fraud. Most of these cases were “fraud for profit,” where a scheme was used to flip homes to get cash and allow the home to go into foreclosure. Other cases involve corporate schemes and possible insider trading.

So what is house stealing? The FBI reported earlier this year that house stealing is a hybrid crime that is a combination of identity theft and mortgage fraud. There are several forms of house stealing, but essentially the perpetrator will fraudulently take title to your home or steal your identity to ultimately sell your home and disappear with the cash. This can even occur while you are occupying your home!

Perpetrators of house stealing will obtain your personal information much like other identity thieves, and use the information to sell your home. Although the end result is to take the cash from selling your home, the crime can occur by the perpetrator fraudulently taking title to your home and then selling it “for sale by owner” (usually providing little or no information to prospects), or the perpetrator can act as if they are you and list your home with a real estate agent (sometimes the agent may be in cahoots with the perpetrator).

The FBI only recently publicized this new trend as they prosecuted a woman in California who pleaded guilty to devising a scheme to defraud over 100 homeowners and $12 million from lenders (

In their report, the FBI concedes that there is not much you can do to prevent a house stealing crime other than being vigilant; this may be due to the fact that most people do not go to the county court house on a regular basis to check the deed to their home. However, the FBI recommends that you check documents and signatures filed in the court house “from time to time.” Any discrepancies should be looked into (and reported to authorities) immediately.

Fortunately, there is more you can do to protect your identity. The NAR, in conjunction with the Federal Trade Commission (, has published a brochure called, “AvoID Theft: Deter, Detect, Defend.” The FTC attempts to educate consumers about identity theft; it is recommended that that you become aware of how these crimes occur so you can defend yourself from perpetrators, monitor your information regularly to spot any irregularities, and be prepared with a plan if you are a victim of identity theft. More information about protecting yourself from identity theft can be obtained from the FTC and FBI (and their corresponding websites).

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 3, 2008. Copyright © 2008 Dan Krell.

Have you unknowingly perpetrated Mortgage Fraud?

You’ve probably read a few recent articles featuring victims of the mortgage crisis. Many of these home owners claimed to have been duped into obtaining loans that they could not afford. One recent article described how the home owner went along with a plan to obtain a mortgage that involved using someone else’s credit as well as artificially inflating their bank account to qualify. Is the home owner guilty of mortgage fraud if she knowingly follows the scheme of their real estate agent and/or mortgage broker to deceive the lender to qualify for a mortgage?

Among the many crime reports published by the Federal Bureau of Investigation (FBI) is the Mortgage Fraud Report. According to the 2006 Mortgage Fraud Report ( mortgage fraud is defined as “the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.” As the Maryland and Virginia areas are described as being significantly affected by mortgage fraud, the FBI cited recent increases of mortgage fraud are due to many perpetrators of fraud who have taken advantage of recent lenient credit standards.

The FBI divides mortgage fraud into two categories, fraud-for-profit and fraud-for-property. Fraud-for-profit typically involves schemes or scams for financial gain. According to the FBI, fraud-for-profit schemes (also referred to as “industry insider fraud”) often involves artificially inflating property values, obtaining loans on non-existent properties, or “revolve equity.” Illegal flipping schemes that commonly use straw buyers and fraudulent appraisals are examples of fraud-for-profit.

Fraud-for-property, however, is the misrepresentation by a borrower so as to obtain a loan to purchase a home. Fraud-for-housing increased in recent years due to the rise of home prices; applicants would provide misleading or false employment, income, and asset information to the lender to qualify for the loan. Although the intent of the borrower is to repay the loan, this activity is still illegal and can lead to Federal prosecution.

To avoid becoming involved in a mortgage fraud scheme, the FBI provides these tips: If it sounds too good to be true, it probably is; Get referral for real estate and mortgage professionals and check the licenses with regulatory agencies; Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques; Look at written information to verify the value of the property; Understand what you are signing and agreeing to – If you do not understand, seek assistance from an attorney; Make sure the name on your application matches the name on your identification; Review the title history to determine if the property has been “flipped” and the value falsely inflated; Know and understand the terms of your mortgage (Check your information against the information in the loan documents to ensure they are accurate and complete); Never sign any loan documents that contain blanks as this leaves you vulnerable to fraud.

Mortgage fraud is not a victimless crime. Besides foreclosed upon borrowers and mortgage entities, other victims include legitimate borrowers and those living in neighborhoods affected by mortgage fraud.

Original published at

By Dan Krell

This article is not intended to provide nor should it be relied upon for legal and financial advice. Copyright © 2008 Dan Krell.