Mortgage Fraud Archives - Page 2 of 2 - Real Estate News and Commentary

August 1, 2015November 23, 2021

Mortgage fraud persists and is local

Mortgage fraud persists and may never go away. Frankly it seems as if the fraudsters are becoming increasingly creative and brazen. The 2014 LexisNexis® 16th Annual Mortgage Fraud Report (lexisnexis.com) seems to agree with the sentiment, saying: “The reduced volume of consumers who are able to qualify for mortgage loans has led to a fiercely competitive and, in some ways, familiar Fraud for Profit marketplace… Ultimately, fraud and misrepresentation, especially in the mortgage application process, is likely to remain a serious and ongoing national problem.”

Looking into why mortgage fraud persists, the LexisNexis® Mortgage Fraud Report indicated that 74% of reported loans in 2013 involved some form of application fraud or misrepresentation. The increase included the misrepresentation of credit information, including credit history and references. Appraisal fraud was reported to be at a five year low; which is most likely due to the implementation of the appraisal Home Valuation Code of Conduct that reformed the relationship between the lender and the appraiser.

Mortgage fraud persists throughout the country. Although the LexisNexis® Mortgage Fraud Report ranked Florida and Nevada number 1 and 2 respectively for mortgage fraud during 2013, don’t think that other regions are immune from scammers and schemers. Mortgage fraud can pop up anywhere. For example, I am local to the Maryland area, which is ranked 9^th in mortgage fraud; which has a Mortgage Fraud Index of 110, that indicates there was more fraud than would have been expected from the number of mortgages originated.

Mortgage fraud persists and is local.

A July 21^st news release from the Maryland District of the U.S. Attorney’s Office (justice.gov/usao-md) reported that a Bethesda MD man pleaded guilty to conspiracy, wire fraud, and aggravated identity theft that stemmed from a mortgage fraud scheme. The scheme defrauded lenders to the tune of $3.8 million by using the names of immigrants and students, as well as false financial information, to buy almost three dozen row houses in Baltimore – all are in default or foreclosure.

The scheme used “straw purchasers” to purchase the homes. The defendant told them that he would prepare mortgage applications, manage the property after purchase, and promised 80% of proceeds of a future sale. Besides paying the straw buyers cash after buying homes, the defendant also paid them for referrals of other potential straw purchasers.

In another case, a former Maryland real estate agent was recently sentenced to 57 months in prison and ordered to pay $2,482,856.05 in restitution for conspiracy to commit wire fraud and aggravated identity theft that stemmed from a mortgage fraud scheme. According to a March 31^st news release from the Maryland District of the U.S. Attorney’s Office, the defendant and his co-conspirator help straw buyers obtain mortgages by “using stolen or false identities, false documents – including W-2 forms, earnings statements, and bank statements – and false credit information…” Straw buyers’ credit worthiness was fraudulently enhanced by creating fictitious lines of credit. The scheme also included inflated appraisals and false contract addenda to direct payments for repairs that were never made.

And it’s not just the usual suspects who are the perpetrators. The MERS scandal that erupted in 2010 not only let us see behind the wizard’s curtain of mortgage lending, but it also brought to light the notion that mortgage fraud can occur at any level. An asset manager, of a commercial mortgage special servicer located in Bethesda MD, pleaded guilty to wire fraud “in connection with a scheme to steal over $5 million from his company,” according to the Maryland District of the U.S. Attorney’s Office. The April 22^nd news release described how he redirected funds intended to be applied to defaulted commercial mortgages.

Original published at https://dankrell.com/blog/2015/08/01/mortgage-fraud-persists-and-is-local/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

November 5, 2008November 23, 2021

Identity Theft can lead to a stolen home

by Dan Krell
Google+

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 (FBI.gov) 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 (FTC.gov) 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 (www.fbi.gov/page2/march08/housestealing_032508.html).

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 (FTC.gov), 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.

March 25, 2008September 9, 2018

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 (https://www.fbi.gov/stats-services/publications/mortgage-fraud-2006) 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 https://dankrell.com/blog/2008/03/25/have-you-unknowingly-perpetrated-mortgage-fraud/

By Dan Krell