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Mortgage fraud tops $5 billion

By Judy Martel · Bankrate.com
Friday, September 27, 2013
Posted: 7 am ET

The good news: The risk of mortgage application fraud is declining in almost every state. The bad news: The result of such fraud in the second quarter of this year totaled an estimated $5.3 billion nationally.

Mortgage_Generic_2_lrgA report from CoreLogic estimates that application fraud risk dropped by 5.6 percent year-over-year during the second quarter. Approximately 0.8 percent, or 19,700 mortgage applications, were identified as having a high risk of fraud in the second quarter.

Risk is measured through analysis of income, occupancy, employment, identity, property and undisclosed debt. Of these, misrepresentation of income showed the biggest year-over-year increase in the second quarter. Property risk, or deliberate over- or under-valuing of a home to show gains, showed the greatest decrease during that time.

Not the usual suspects

Among the states, Ohio showed the highest year-over-year growth in mortgage application fraud risk, rising by 30.1 percent during the second quarter. It was followed by Hawaii, with a 19.6 percent rise in fraud, then Kentucky (16.6 percent increase), Connecticut (15 percent) and Alaska (13.8 percent).

The state with the highest estimated value of fraudulent mortgage applications was the one where real estate values are sky-high: California, at $864 million. It was followed by other states with soaring home values -- New York at $278 million in estimated fraud and Florida at $273 million.

While the risk of fraud has been declining over the past few quarters, Mark Fleming, chief economist for CoreLogic, said in a statement that he expects to see an increase. "As the housing market recovers, the volume of mortgage applications is rising and increasing the total amount of fraudulent mortgage loan application dollars."

Keep up with your wealth and mortgages and follow me on Twitter: @JudyMartel.

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7 Comments
Nancy small
September 27, 2013 at 10:00 pm

what is going on? how are people being defrauded? I have tried several times to refinance, but could not pin down the sales men to disclose the total cost of the new mortgage I wanted. they showed wonderful low rates, closing costs at a minimum. but at the end there was a vage and in one case almost an insulting sales person via e-mail and phone , not telling me exactly how much I had to pay for the new money. Have any of you been defrauded and in what way?

tina
September 27, 2013 at 8:23 pm

MIC is the biggest crook out there. Stay far far away.

Roland
September 27, 2013 at 7:57 pm

Dr Bill thanks for your service. Have you considered small claims court - no attorney required. They are required by law to give you a good faith estimate of closing costs. Were the salesman's claims reflected in said document. If not, unfortunately it's your word against his. Try writing letters to the VA, your state banking commission and the Consumer Financial Protection Bureau. Also send Investors Corp.I.C a letter telling them they have 1 week to contact you our you are taking your story to the press.

Dr. Bill Gerber
September 27, 2013 at 6:32 pm

There is nothing worse than for a VA lender to take advantage of veterans by misrepresenting "closing costs" versus actual, escrow refunds, and other enticements. We went through Mortgage Investors Corp.I.C. to refinance at a lower rate. What the salesman represented versus the outcome was insane. We've made numerous calls to the new lender, only to be told we can't speak to a supervisor, we can't speak to the original salesman....in short we discovered that $1800 dollars was stolen from us. If we approach an attorney, the amount we'd like to recover -- which is OUR MONEY -- is only a down-payment on his fees. I served my country during the Viet Nam era. I was shot at, saw my friends die, and got spit on when I came home from my fellow U. of I. students. I didn't expect my country to spit on me, nor the V.A. and the sub-contractors!

Deborah Knight
September 27, 2013 at 6:26 pm

Please tell me how to go about getting my property back as well as funds for wrongful fraudulent loan and foreclosure. This also wiped out my good credit history and put me in the poor house. My plans to retire and make income from the rental property fell apart. I am sure after talking to many in the on this subject that I was very much defrauded on many accounts. I do not have the funds to hire a top attorney. They tell me it is all most impossible to try and sue these big companies. But there needs to be some kind of justice out there for all the people like me. I lost a 4 plex worth 1/2 million dollars. after I totally refurbished it. I all most lost the 3 plex next to it. The real estate company told me they would get it as well and all most did. The loan companies and the real estate company worked together in forcing my tenants out even before the foreclosure began. Help Deborah Knight in Denver Colorado