FBI: Mortgage Fraud Is Rampant in U.S.

I wonder how much this affects the calculations put in automatic valuation databases, which crank out all the home refinances and equity loans--could it be bogus values are being mixed in to inflate neighborhood prices?

***

WASHINGTON (AP) -- Fraud is running rampant in the nation's mortgage industry, with nearly three times as many reports of suspicious activity so far this year compared with 2001, a top FBI official said Friday.

"It has the potential to be an epidemic," said Chris Swecker, FBI assistant director for criminal investigations.

Through the first nine months of 2004, mortgage companies and banks have reported more than 12,100 instances of suspicious activity compared with only 4,220 in 2001. The FBI currently has 533 pending mortgage fraud investigations, compared with 102 in 2001.

Law enforcement officials say the lending and refinancing boom that accompanied record low interest rates in the past few years is a key reason for the increased fraud. The FBI has identified several "hot spots" around the country where fraud is especially prevalent, including Florida, California, Nevada, Michigan, Missouri and Illinois.

"You can find this anywhere in the country," Swecker told reporters.

Robert M. Crouch, chairman of the Mortgage Bankers Association, said the industry has a Fraud Task Force working with the FBI to "expose these criminals and bring them to justice."

"Our lenders have seen an increase in the number and variety of fraudulent schemes over the last several years committed against them," Crouch said. "It has cost the mortgage banking industry and other financial service providers billions of dollars."

One common mortgage fraud scheme is "property flipping," in which property is purchased, appraised fraudulently at a much higher price and then quickly sold. The mortgage holder is then left with property worth much less than the loan it issued.

Other schemes involve fake identities and credit histories, use of "straw buyers" to conceal the true buyer's name and forged loan documents.

Mortgage fraud is one of several financial crimes that the FBI has been targeting for extra attention in recent months. This effort, which involves 47 FBI field offices, has resulted in more than 151 charges since early August in cases with potential losses to banks and other businesses of an estimated $3 billion.


http://biz.yahoo.com/ap/040917/fbi_mortgage_fraud_4.html

[F.Gordon]

1. Deja Vu: the 80's

The fraud being committed sounds more like purchase money loans, and not refinances. The question I would have is how much of this fraud is being committed by the Home Builder, the Realtor, or the Mortgage Broker...or dare I say...the Mortgage Banker?

It's the same shit that was a precursor to the S&L collapse, when many of the S&L's were the ones committing the fraud. It took a good 10 years to recover from that bust. This new coming bust (yea, I'm a doom and gloomer) could take MUCH longer to climb back from....

And it's not like the FBI has anything better to do, like say....hunt down terrorists and stupid shit like that.