Fraud--and the victim is you.
MORTGAGE FRAUD HAS MOVED INTO the headlines, with a recent article in USA Today USA Today
National U.S. daily general-interest newspaper, the first of its kind. Launched in 1982 by Allen Neuharth, head of the Gannett newspaper chain, it reached a circulation of one million within a year and surpassed two million in the 1990s. stating in bold type bold type n (Typ) → caractères mpl gras
bold type n → Fettdruck m
bold type n (TYP that the FBI considers the problem an "epidemic." An Associated Press Associated Press: see news agency.
Associated Press (AP)
Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. headline also recently announced: "Mortgage Fraud is Rampant in U.S." Just through September, the FBI had opened 533 mortgage fraud investigations this year--more than three times the number started in 2002.
"You can find [mortgage fraud] anywhere in the country," says Chris Swecker Chris Swecker (born July 14, 1956 in El Ferrol, Spain) was Assistant Director of the FBI until Spring 2007 , FBI assistant director for criminal investigations. The Mortgage Bankers Association (MBA MBA
Master of Business Administration
Noun 1. MBA - a master's degree in business
Master in Business, Master in Business Administration ) and our members have been working closely with the FBI, since we share its concern about this growing problem. Mortgage lenders have lost billions of dollars due to fraud in recent years.
Syndicated real estate columnist Kenneth Harney reports, "Mortgage fraud is now one of the hottest con games going." He notes that industry studies claim "between 10 and 15 percent of all homeloan applications involve some fraud or misrepresentation misrepresentation
In law, any false or misleading expression of fact, usually with the intent to deceive or defraud. It most commonly occurs in insurance and real-estate contracts. False advertising may also constitute misrepresentation. ."
MBA recently had a chance to testify before the House Subcommittee on Housing and Community Opportunity at a hearing examining the growing problem of mortgage fraud. Marta McCall, senior vice president for risk management at American Mortgage Network Inc., San Diego, spoke for all lenders when she testified that "Mortgage fraud is a growing part of our residential mortgage system that costs the industry and consumers millions of dollars each year."
To illustrate the toll fraud can take on innocent lenders, McCall shared the story of one small mortgage company in the Southwest. This small lender with a solid reputation was defrauded by a single crooked loan officer The loan officer was debarred from Federal Housing Administration Federal Housing Administration (FHA)
Federally sponsored agency chartered in 1934 whose stock is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures (FHA See Federal Housing Administration.
See Federal Housing Administration (FHA). ) programs for one year, but is still working in the industry. But the company was debarred from the FHA program four years after the fraud was committed, and forced to close. As McCall said, "Owners who had built up the company lost their investment, and over 30 employees lost their jobs because of the crimes of a single person."
Lenders have experienced increases in both the number and variety of fraud schemes used against them. One common tactic, known as "flipping," involves obtaining an inflated appraisal and then selling the property for a large profit. Fraud perpetrators often hide behind "straw borrowers," who unwittingly may be given falsified financial and credit histories in order to qualify for a mortgage on the property being flipped. Stolen identities also are used to help fraudsters obtain loans.
Such criminal acts often result in foreclosures on overvalued Overvalued
A stock whose current price is not justified by the earnings outlook or price/earnings (P/E) ratio and thus, expected to drop in price. Overvaluation may result from an emotional buying spurt, which inflates the market price of the stock or from a deterioration in a properties. Subsequent losses can result in serious financial damage for lenders at a time when margins are already being squeezed.
Fighting fraud requires a multi-pronged approach. Lenders should work with law-enforcement officials to root out the problem, because fraud often is conducted by a criminal ring that includes originators, real estate agents, appraisers and closing attorneys. Mortgage industry participants also need to share information, to make it harder for fraud perpetrators to find new companies to victimize. Lenders should keep developing new ways to uncover fraud within their firms. Finally, law enforcement can help by letting the industry know what its investigations are uncovering, so that companies can act aggressively against fraud. As McCall testified, "MBA believes there is no substitute for strong law enforcement that aggressively prosecutes those who commit mortgage fraud and sends a clear message to those who contemplate it."
Fraud is on the rise
Several factors are behind the increasing incidence of mortgage fraud. Market changes over the past decade have fostered the rise of a growing number of large national firms. Large operations produce efficiencies, yet they can weaken some traditional safeguards.
Lenders today find it's harder to monitor the reputation and professional standards of every mortgage broker and appraiser A person selected or appointed by a competent authority or an interested party to evaluate the financial worth of property.
Appraisers are frequently appointed in probate and condemnation proceedings and are also used by banks and real estate concerns to determine the market with whom they deal. Opportunities for fraud can be exploited more easily than in the days when lenders personally knew many of the professionals they worked with.
Higher home prices also add to the temptation to commit fraud. Increased dollar amounts attract organized crime, as it seeks to launder Launder
To move illegally acquired cash through financial systems so that it appears to be legally acquired. illegally earned cash through real estate transactions. Additionally, the end of the refinancing boom has some unethical industry participants looking for Looking for
In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. ways to keep their income at the same level it was a year or two ago.
Lost in many of the news stories about fraud is the fact that fraud's toll falls hardest on lenders. The financial damage produced by fraud isn't shared by the secondary market, because lenders are obligated ob·li·gate
tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates
1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force.
2. To cause to be grateful or indebted; oblige. to repurchase fraudulent loans. Even when the parties who commit fraud are caught, they typically don't have the financial resources to compensate lenders for their losses.
MBA members have found that insurance against fraud isn't readily available. Lenders also can face a public-relations nightmare if consumer groups accuse them of allowing innocent homebuyers to be taken advantage of by a fraud ring, even though the lender was victimized as well.
The FBI's Swecker notes that the bureau is "working closely with all the industry's professionals--mortgage brokers, Realtors, accountants, appraisers, loan officers and title companies--who are as anxious as us to weed out the bad seeds."
MBA also endorses the MIDEX MIDEX Medium-Class Explorer
MIDEX Milan Stock Exchange (index of the averagely capitalised shares)
MIDEX Mid-Size Explorer (NASA)
MIDEX Million Dollar Executive database, which records law enforcement and regulatory actions against fraudulent activity, as well as reports from mortgage lenders about specific alleged incidents. MIDEX is available from the Mortgage Asset Research Institute Inc. (MARI), Reston, Virginia (www.mariinc.com).
MARI also is helping MBA pilot the Mortgage Fraud Alert System (MFAS MFAS Multi-Frame Alignment Signal
MFAS Mid-Frequency Active Sonar
MFAS Multi-Frequency Antenna System ), through which MBA members can report the date, location and type of alleged misconduct or misrepresentation they've encountered. Other lenders then can increase their oversight and due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. in those areas.
MBA will continue its efforts to thwart those who are tempted to illegally enrich themselves at your expense. We believe the time has come to get tough with this blight on our business. You don't deserve to be victimized, and together we will fight back.
JONATHAN L. KEMPNER
MBA President and Chief Executive Officer