Mortgage Fraud Cases Rise 20%

The percentage of mortgage fraud activity rose 20 percent in the third quarter compared to a year earlier, a report by the Financial Crimes Enforcement Network finds. Almost 62 percent of the nearly 20,000 suspicious activity reports in the third quarter, which ended Sept. 30, began about four years ago, the report noted.

Suspicious activity included loan workout or debt elimination, questionable refinance or loan modification attempts, as well as Social Security number discrepancies on loan applications.

“As housing markets look to recover, criminals persist in their efforts to prey on struggling home owners, while financial institutions continue to uncover apparent fraud as they work through their portfolios of earlier mortgages now in default,” FinCEN Director James Freis said in a statement.

The top five states with the highest number of fraud reports per capita in the third quarter were:


Meanwhile, the top five counties for fraud reports were Santa Clara County, Calif.; Honolulu; Orange County, Calif.; San Bernardino County, Calif.; and Palm Beach County, Fla.

Source: Financial Crimes Enforcement Network

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Where Is Mortgage Fraud Most Common?

Reports of mortgage fraud are on the rise: A government agency reported this week a 31 percent jump in mortgage fraud cases for the first quarter of this year, largely attributed to additional reviews from banks of loans issued several years ago that now have gone bad.

California cities dominated the rankings for the highest incidences of mortgage fraud in the nation — occupying six of the top 10 spots, according to the report issued by The Financial Crimes Enforcement Network.

The following is a list of the top 11 metro areas with the highest reports of mortgage fraud in the first quarter of this year, according to the Financial Crimes Enforcement Network.

1. San Jose-Sunnyvale-Santa Clara, Calif.
2. San Francisco-Oakland-Fremont, Calif.
3. Los Angeles-Long Beach-Santa Ana, Calif.
4. Riverside-San Bernardino-Ontario, Calif.
5. Sacramento-Arden-Arcade-Roseville, Calif.
6. Miami-Fort Lauderdale-Pompano Beach, Fla.
7. San Diego-Carlsbad-San Marcos, Calif.
8. Las Vegas-Paradise, Nev.
9. Atlanta-Sandy Springs-Marietta, Ga.
10. Salt Lake City, Utah
11. Chicago-Naperville-Joliet, Ill.

Source: “Top 20 Metros for Mortgage Fraud,” Inman News (June 29, 2011)

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Fed Accuses Major Bank of Mortgage Fraud

The federal government is suing Deutsche Bank, accusing the bank of committing fraud by repeatedly lying to the government and for reckless lending practices in underwriting thousands of federally insured mortgages that ultimately cost taxpayers hundreds of millions of dollars.

U.S. Attorney Preet Bharara said the bank “repeatedly and brazenly” took part in shoddy lending practices for mortgages “that were really ticking time bombs.” Bharara says sometimes the bank even failed to verify that a mortgage applicant even was employed. “In fact, they often seemed to treat red flags as if they were green lights. … While the homes the defendants issued loans for may have been built on solid ground, the defendants’ lending practices were built on quicksand.”

The lawsuit, which seeks $1 billion in damages, alleges that Deutsche Bank lied about the quality of its lending practices in order to get access to the government’s mortgage insurance program by the Federal Housing Administration. The Fed accuses the bank of carrying out fraud through its subsidiary, MortgageIT. Between 1999 and 2009, the lawsuit alleges that MortgageIT received backing from the FHA on more than 39,000 loans totaling more than $5 billion.

“Borrower after borrower defaulted–often within just months of closing–because those loans were doomed to fail,” Bharara said at a news conference.

As of February, the Department of Housing and Urban Development has paid more than $386 million in FHA insurance claims and other costs for loans approved by the bank that ultimately went bad.

“We believe the claims against MortgageIT and Deutsche Bank are unreasonable and unfair, and we intend to defend against the action vigorously,” Deutsche Bank spokeswoman Renee Calabro says.
Calabro says nearly all of the activity outlined in the lawsuit occurred before Deutsche Bank even acquired MortgageIT in 2007.

Meanwhile, government officials are warning other banks to be on alert too. Federal regulators and attorneys general nationwide are investigating lender practices in foreclosure cases. The number of foreclosure fraud class-action lawsuits have already increased against major banks across the country.

Source: “U.S. Sues Deutsche Bank, Alleging Mortgage Fraud,” The Washington Post (May 4, 2011) and “Feds Sue Deutsche Bank, Alleging Mortgage Fraud,” Associated Press (May 3, 2011)

Man Pleads Guilty in $23M Mortgage Fraud Case

A New York real estate attorney is the ninth defendant convicted in a mortgage fraud scheme that defrauded banks out of more than $23 million in home mortgage loans.

Cheddi Goberdhan, an attorney in Queens, N.Y., pleaded guilty in federal court to bank fraud and conspiracy to commit bank and wire fraud. He faces a maximum of 210 years in prison, as well as paying restitution to the victims.

Prosecutors say the scheme involved arranging for homes to be purchased by straw buyers, who posed as buyers but who never had any intention of living in the properties. Loan officers obtained mortgages for the home purchases by submitting fraudulent applications to banks and lenders. The straw buyers would then default on the mortgages and the mortgage proceeds would be passed along to those involved in the scam, according to prosecutors.

Source: “New York Real Estate Attorney Pleads Guilty to Fraud,” Dow Jones Business News (Jan. 11, 2011)

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Signs Mortgage Fraud Might Be Picking Up

Mortgage fraud has increased by more than 20 percent since early 2009, according to a report from business information firm CoreLogic.

Lenders blame the increase on the increasing popularity of high-risk, high-volume loans underwritten by the government, especially FHA, as well as the prevalence of short sales and REO sales.

“Fraud continues to shift to areas of the lending business where large volume increases occur over short periods of time, or where advanced risk mitigation processes are not squarely in place,” said Tim Grace, senior vice president of Fraud Solutions at CoreLogic.

CoreLogic reported:

· Increased lending through FHA and HARP (Home Affordable Refinance Program) loan programs accounted for most of the increased risk in 2009 and 2010.

· Second quarter of 2010 had the highest volume of single-family resident short sales with nearly 60,000 short-sale transactions.

· REO transaction volume is more than twice that of short sales with 120,000 REO sales in the second quarter of 2010.

· Investment companies are involved in a disproportionately higher percentage of suspicious resales.

· Flipping and flopping hot spots in the U.S. are Southern California, Phoenix, Detroit, and Atlanta.

Source: CoreLogic (11/17/2010)

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Mortgage Fraud Is on the Rise

Mortgage fraud — which peaked in 2006 — rose 17 percent last year after falling 57 percent in the prior two years, reports CoreLogic.

Analyzing about 7 million home loans made by hundreds of lenders, the research firm found that $14 billion in loans were originated with fraudulent application data in 2009.

Lenders have tightened criteria and look more closely at mortgage applications since the collapse of the real estate market; but fraudsters now are relying more on falsifying documents, recruiting loan officers and other bank insiders to work for them, and stealing identities to get loans.

Source: The Wall Street Journal, Robbie Whelan (08/23/10)

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Mortgage Scams Continue to Grow

Mortgage fraud continues to rise, increasing 7 percent in 2009 after going up 26 percent in 2008, according to the Mortgage Asset Research Institute.

Fraud usually goes undetected until the loan goes bad, says Jennifer Butts of the institute. “We believe that mortgage fraud is significantly understated,” she says.

The 10 states where mortgage scams are most common:

• Florida
• New York
• California
• Arizona
• Michigan
• Maryland
• New Jersey
• Georgia
• Illinois
• Virginia

Source:, Les Christie (04/26/2010)

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Mortgage Fraud Keeping FBI Busy

The Federal Bureau of Investigation has more than 2,600 open cases of mortgage fraud, FBI Director Robert Mueller told Congress on Wednesday. Most of the cases involve losses of more than $1 million.

More than 300 special agents are assigned to mortgage fraud, which is up more than 200 percent from what it was three years ago, according to the FBI.

“The schemes have evolved with the changing economy, targeting vulnerable individuals, victimizing them even as they are about to lose their homes,” Mueller said in prepared remarks to the Senate Judiciary Committee.

Source: Reuters News

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