Mortgage fraud on the rise

From the Nashua Telegraph:

Depressed markets encourage fraud

The current real estate market conditions provide an excellent backdrop for mortgage fraud. Here are some of the typical factors that open the door to fraud:

• Buyers trying to get into the market before interest rates climb much higher are tempted to cheat to get what they want;

• Financially strapped homeowners with soaring adjustable rate mortgages who may be enticed to bend the rules to get out of a bad situation;

• Desperate sellers unable to find ready and financially able buyers who are lured by fraudsters who offer them a way out.

As long as the market stays in the doldrums, mortgage fraud will continue to thrive, say experts.

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 by federally insured agencies. Investigators predict the number will increase as fraudsters prey on people with adjustable rate mortgages now facing foreclosure as their rates reset and they can no longer afford their payments.
…
Too often, he says, mortgage originators look at a loan application and suggest to the borrower that a few doctored or falsified documents might qualify them for a better program. This is federal mortgage fraud. There’s a whole undercurrent where people aren’t thinking it’s that big of a deal. But it’s a federal crime. You can be indicted and go to jail.

Sometimes the real estate agent or the lender is the culprit. They’re both paid on commission and may be struggling financially because of the real estate downturn, says Patricia Yamato, president of Florida Association of Mortgage Brokers. But the bottom line is that if the borrower signs a mortgage application and knows the information on it isn’t true, everyone is responsible.

Desperate sellers can be easy targets. When a buyer offers more money than the seller is asking, it’s hard to turn it down when it’s been sitting on the market for months. But it should raise serious concerns, especially if the buyer wants the seller to “refund” the difference between the asking price and the sale price after the closing, or adds money for repairs the seller knows aren’t necessary.