FBI 2010 Mortgage Fraud Report
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The schemes and techniques include:
Details on these activities are on pages 17 through 21 of the report. In a quick summary of the most often occurring see below (and be certain to read the report for details).
Loan Origination Schemes
These are broken into two primary categories: Fraud for Property and Housing and Fraud for Profit. Fraud for Property and Housing is based on obtaining a loan for the purchase of a primary dwelling and typically includes a single loan. The motive is often to conceal the debt of the borrower but the borrower intends to repay the new loan. Fraud for Profit often involves multiple loans with an intent to acquire the loan proceeds with no intention of repaying the loan(s). Both involve fraudulent borrower information–phony pay statements, made-up borrower balance sheets needed to obtain the loan, fraudulently-inflated appraisals, and same-day property flips.
Title/Escrow Settlement Fraud/Non Satisfaction of Mortgage
The most frequent of these is the embezzlement of funds for uses other than that specified by the lender’s closing instructions including failure to pay off existing loans and liens, transfer of the property without the owners’ knowledge, failure to record documents (or delayed filing of mortgage documents), collecting title premium fees and failing to issue policies, fraudulent liens and distribution of settlement funds to co-conspirators.
Real Estate Investment Schemes
This primarily involves persuading buyers to purchase property at inflated, above market prices, with the promise of quick appreciation. These typically see the buyer incurring a personal financial loss when the true lower value of the property is discovered.
Short Sale Schemes
Short sales are pre-foreclosure sales of the property with the lender agreeing to allow the sale at a price less than the outstanding loan balance. Typically the lender is never informed of the higher, best offer with the property being resold on the same day from the intermediaries to the ultimate owner. Other frauds include failure to record documents, failure to pay off existing loans, false estimates of repairs, manipulated Broker Price Opinions, inappropriate comparable sales—and many others.
Commercial Real Estate Loan Fraud
Key areas of fraud here include phony documents (property, financial, appraisal, zoning), property flipping, money laundering, straw buyers and others. The FBI has found that fraudulent commercial real estate lending was involved in half of all bank failures.
This fraud often centers on advanced, up-front fees from homeowners by individuals and firms alleging they can eliminate the possibility of foreclosure to homeowners behind in their payments. A second form is having the homeowner transfer the property to the fraudulent party with the fraudsters promising to rent the home back to the original owner (with no intention of the fraudster ever to make the payments).