Mortgage fraud flourishes in down markets |
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Everyone gets hurt
Some people might think that the only victims of mortgage fraud
are the lenders who finance the shady deals. Fulmer, who now works
with Atlanta-based Interthinx, investigating mortgage fraud for
lenders, knows better. The occurrences of crime started to increase
in her neighborhood; drug dealers and pimps moved in. There was
even a shooting.
Plus, because of the inflated sales prices, taxes
went up by 30 percent. In neighborhoods where fraud has taken its
toll and many houses are in foreclosure, those houses usually are
sold at a significant loss. That makes it virtually impossible for
legitimate owners to sell their properties. Fulmer says she's just
now starting to see legitimate real estate values in her neighborhood
10 years later. Plus, many fraudsters steal the identities of people
with good credit to perpetuate the frauds.
"The number
of innocent victims is astounding," she says. "The biggest tragedy is
people who live in neighborhoods who do nothing and it just shows up on their
doorstep one day," she says. "It's a nightmare."
If that weren't bad enough, the fraudsters have expanded from just greedy mortgage
brokers and real estate appraisers to dangerous criminals, such as drug smugglers,
Fulmer says. "You can get just as much money at a closing
(as in a drug deal) and no one is shooting at you," she says.
The extent of mortgage fraud isn't fully known; the
FBI estimates that lenders lost about $1.5 billion to the crime
in 2006, but that's only the crimes reported through Suspicious
Activity Reports and only federally insured agencies are required
to submit those, Fulmer says.
Forms of
fraud
The crime comes in several forms. One common type is borrower fraud,
when a person lies on a mortgage application about his income, the
source of his down payment or how long he's been employed. With
the high costs of housing and the popularity of stated-income loans,
it can be tempting for a person who is desperate to get into a house
to fudge the numbers to make the loan work.
Much
of the borrower fraud is being tacitly encouraged by real estate professionals
who should know better, says Miami-based real estate attorney Oscar Rivera. "We
have (mortgage originators) who look at an application and tell (borrowers), 'If
you could show us these three things, we might be able to get you into this other
program,'" Rivera says. "When you tell someone, 'This is federal mortgage
fraud,' they just sit back and look at you. There's a whole undercurrent where
people aren't thinking it's that big of a deal. It's a violation of federal banking
regulation. You can be indicted and go to jail." | 
