Mortgage Fraud Increases In 2008

The FBI does not report the total dollars involved, but it attributes the increase to the severe downturn in the mortgage market. "While the amount of mortgage fraud cannot be precisely determined, industry experts agree that there is a direct correlation between fraud and distressed real estate markets."

The FBI follows two types of mortgage fraud. The most common in numbers (if not in dollars) is lying on mortgage applications to get a mortgage one would not otherwise receive. In these cases, the borrower intends to pay the loan off.

Less common, but involving far more dollars, is fraud in which a group of people conspire to collect money they never intend to pay back. There are many ways that people use to effect this type of fraud. One common one is to pay a straw to get a loan on a property, knowing they will never take possession. The group committing the fraud takes the money and runs, leaving the bank holding the bag.

The FBI report lists a number of other frauds, some old and some new, including property flipping, builder-bailouts, short sales, and foreclosure rescues. "Additionally... new schemes... [include] reverse mortgage fraud, credit enhancements, condo conversion, loan modifications, and pump and pay in response to tighter lending practices."

Written by Jack Edmonston
http://www.askjackaboutdebt.com/