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Reports of Mortgage Fraud Are Way Up

Posted by: Peter Coy on November 7, 2006

The Treasury Dept.’s Financial Crimes Enforcement Network recently announced that “suspected mortgage loan fraud in the United States continues to rise, and has risen 35 percent in the past year.” [Update: Treasury says it can’t tell how much of the increase is an actual change vs. more thorough reporting. Thanks to Matt Carter of Inman News for pointing that out to me.]

Here’s a link to its 21-page report.

Crimes range from identity theft to falsified credit scores to “silent seconds,” where buyers borrow their downpayments but don’t reveal that to the primary lender.

Now that the tide in the housing market is going out, all the junk is showing up on the beach.

Reader Comments

Matt Carter

November 7, 2006 7:39 PM

Actually, they kind of hedged on the issue of whether mortgage fraud is actualy on the rise.

FinCEN said the increase in suspicious activity reports documenting possible instances of mortgage fraud COULD be attributable to the increased number of loans made during the housing boom, and an increased awareness of mortgage fraud (and hence an increased liklihood to file a report when mortgage fraud is suspected).

You see the same kind of debate over autism numbers -- is it really becoming more prevelant, or are we just better at spotting it these days?

Suspected mortgage fraud as a percentage of all suspicious activity reports was 4.9 percent in 2005, compared to 2.1 percent in 1997 -- not quite as dramatic as the 1,411 percent increase in the raw number of reports involving suspected mortgage fraud during roughly the same period.

Jack Olson

November 7, 2006 9:15 PM

It's the Do Nothing FBI! Mortgage Fraud is already a Title 18 federal felony with up to $1m fine and 30 yrs prison per occurence. Mortgage Fraud is also Bank Fraud, Wire Fraud, Mail Fraud. Yet the FBI does not investigate, indict nor convict even when confronted with the evidence of a continuing series of fraudulent loans. It's the Do Nothing National Association of Realtors, State Association of Realtors, local Reno association of Realtors who don't hold their fellow Realtors accountable, even when they know who the fraudster Realtors are and that honest Realtors can't compete against the fraudster Realtors. It's the Do Nothing NV State Mortgage Division who take bribes from the fraudster Realtors and covers the Mortgage Fraud up. It's the Do Nothing NV State Real Estate Division and NV State Attorney General who also cover up the Mortgage Fraud even when presented with a preponderance of clear and convincing evidence. It's the Do Nothing Lenders who want that short-term quarterly profit to show Wall Street they made off the origination of the fraudulent loans who don't call the loans due when confronted with the evidence the loans are fraudulent. It's the Real Estate Broker at Pru NV and their agents who threaten to blackball the loan officer who refuses to take the bribes offered by the fraudster Realtor for the fraudulent loans then closes the fraudulent loans with other lenders while threatening to get the loan officer fired for not "doing what everyone does." It's the Do Nothing Mortgage Bankers Association Fraud Committee Members (many presidents of their banks)who refuse to take action on the fraudulent loans their companies originated because they don't want to lose the Realtor business. So naturally their local managers nationwide do the same. It's the Do Nothing Freddie Mac and Fannie Mae who refuse to act on the fraudulent loans when presented with the Mortgage Fraud because they're worried Wall Street will find out how at risk they really are. The IRS has described perpetuators of Mortgage Fraud as "economic terorists" and profits from Mortgage Fraud as Money Laundering. Due to the fastest growing white collar crime, Mortgage Fraud, and all these Do Nothings the trillions of dollars in the American real esatate market is a House of Cards rapidly crumbling down and makes the S & L Crisis look small in comparison which each one of us ended up paying for. Suck it up my fellow Americans as the Perfect Storm of Mortgage Fraud is upon us and the lenders will find a way to make us pay again rather than Do Anything now to avoid it.


November 8, 2006 8:59 AM

Thanks for the writing "Mortgage Fraud Is Way up". It's time we start facing facts that as real estate increased in value during the bubble, crimes were committed. According to the FBI, Real Estate Fraud is now the number one white collar crime. They say that last year crooks skimmed 1 billion off the $3billion mortgage industry! Every smooth talking, get rich quick snake out there jumped on the band wagon! Many joined the game legally while others greed was so out of control they didn't! Everyday you hear of a new mortgage fraud case. Two years ago all you heard was how much money people were making in real estate! Unfortunately, millions of innocent people will have to pay the price that made many very wealthy!

Don't think this is the end of mortgage fraud! As people get desperate to sell their properties that they can't afford, they will be easy prey for cons and fraud. It's only beginning. Desperation brings out more crime than prosperity!


November 11, 2006 7:31 PM

Let's face it. America is a free country. Free to cross our borders illegally. Free to commit fraud. Free for uncaught criminals to prey on others with big money schemes. FREE FREE FREE. America will go down the tubes with all the free stuff, but rest assured that Americans won't see many of these FREE things.

randolph corbrett

November 21, 2006 1:16 PM

I am a victum of real estate fraud in new york and have been fighting this situation since 2002. I have all the proof needed and cant find justice. In your enormous wealth of contact do you have any ideas.


November 27, 2006 11:15 AM


There is a blog out there called The Housing Bubble Blog 2. There are some folks over there who may be able to help you. I would visit and post there. I'm sure you will get some answers.


January 7, 2007 5:32 PM

Jack O-

WOW...Nicely done! Good breakdown of our current SAD state of affairs. I hate to say, I am afraid your dire predictions could come true. I do think the size and scale of the Mortgage Fraud storm in this country could absolutely dwarf the S&L scandal. Like you so eloquently put it, no one at any level involved, wants to bring this gravy train to a screaming halt, and it is only a matter of time before it just implodes.

Fasten your seatbelts folks-

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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