The deeper the banks go to uncover faulty or fraudulent mortgage transactions conducted during the housing boom, the uglier it gets. Accounts of mortgage fraud skyrocketed by 88 percent in the second quarter of this year, according to a report from the Financial Crimes Enforcement Network of the Treasury Department, the agency in charge of enforcing laws requiring banks to report fraud.
As buyers of mortgage-backed securities bury the banks in lawsuits to recoup losses from failed loans guaranteed by Fannie Mae and Freddie Mac, financial institutions have had to dig through mortgage paperwork to uncover wrongdoing. Boy, are they finding it. In the second quarter of 2010, there were 15,727 tips about possible mortgage fraud, compared with 29,558 in the second quarter of this year.
The majority of tips during the second quarter (81 percent) were related to mortgages that closed before 2008, prior to the recession and the housing crash.
The most common fraud was related to false statements about income, home occupancy, or debts and assets. The states with the most reported fraud were California, Florida, Nevada and Illinois, according to the report.
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