Mortgage Fraud Investigation Plan Unveiled By FBI – Agency To Team Up With Mortgage Bankers Association To Fight Crime

Mortgage Fraud Investigation Plan Unveiled By FBI – Agency To Team Up With Mortgage Bankers Association To Fight Crime

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(Best Syndication) The Federal Bureau of Investigation (FBI) has launched a plan to fight mortgage fraud. There are two types of mortgage fraud. The first is fraud for property where a buyer may lie about his or her income or debt or other information to buy a home. This accounts for about 20 percent of the mortgage fraud, according to the FBI.

The second type of fraud is for profit. There are numerous methods used to scam lenders including property flipping, fake identities, straw buyers, equity skimming and falsified appraisals. Property flipping involves property that is bought and sold several times to increase the value using appraisals. After a succession of sales the loan goes into default and the buyer disappears.

Straw buyers (using nominee loans) buy homes with the identity of the borrower concealed. The buyer may use the name and credit history of a willing accomplice. Some buyers will use a stolen identity to get a mortgage on a home. The stolen identity along with the stolen credit history is used to gain financing.

In some mortgage fraud cases an appraiser is employed to inflate the value of the home. The final fraud mentioned by the FBI report is equity skimming. Equity schemes involve a straw buyer. Prior to closing, the straw buyer signs the property over to the investor, who in turn rents the property out without making any mortgage payments.

The problem has grown over the past few years. In September of 2002, the FBI had 436 mortgage fraud investigations. Currently, they have more than 1,036. That's an increase of 237 percent in less than five years, according to their report. More than half of the cases involve more than $1 million and 57 percent of the cases involve federally insured financial institutions; 8 percent are government entities like the Department of Housing and Urban Development (HUD); and 35 percent are investors.

The FBI says that these schemes take advantage of the $2.37 trillion mortgage market in the United States. They estimate that fraud has cost the industry between $946 million and $4.2 billion in 2006. On March 8th the bureau announced a partnership with the Mortgage Bankers Association.

"This is clearly a crime problem in need of a real answer. That answer is team work," says Special Agent Karen Spangenberg, chief of the Financial Crimes Section of the FBI's Criminal Investigative Division. "The newly developed Mortgage Fraud Warning enhances our joint effort to combat this financial crime problem by putting would-be wrong-doers on notice, and potentially stopping the crime before it is committed.”

By Dan Wilson
Best Syndication Writer

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