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FBI: Mortgage Fraud Activity Up in 2010

More brokers, loan officers, realtors, and others defrauded lenders, servicers, and homeowners over 2010 despite improving conditions in the housing market at large, according to the ""Federal Bureau of Investigation"":http://www.fbi.gov/ (FBI), which released a ""comprehensive report"":http://www.fbi.gov/stats-services/publications/mortgage-fraud-2010/2010-mortgage-fraud-report Friday. Mortgage fraud cases and investigations amounted to 3,129 cases over the year, 12 percent more than in 2009 and some 90 percent above the same trends in 2008.


Pooling data from ""CoreLogic"":http://www.corelogic.com/, the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm, and federal agencies, the FBI's 2010 Mortgage Fraud Report found upward-bound cases of mortgage fraud across the country over the past year. Referencing CoreLogic, the FBI said that applicants fraudulently filed some $12 billion in loan applications last year. Seventy-one percent, or 2,222, of the FBI's mortgage fraud cases involved more than $1 million in dollar losses.

According to the report, CoreLogic summed up much of the reported mortgage fraud activity as income misrepresentation, despite a decline in the activity from 2009 to last year. Undisclosed debt, employment, and occupancy also accounted for fraudulent activity.

A spokesperson for CoreLogic could not be immediately reached for comment.

""The FBI views mortgage fraud as a significant crime problem,"" says William Carter, a bureau spokesperson. ""Combating fraud in this area is a priority due to the impact of mortgage lending on the nation's economy, and also due to the impact of foreclosures on the community.""


Commenting on the spike in mortgage fraud activity over 2010, Carter calls the ""distressed economy... the most significant factor in the perpetration of mortgage fraud.""

The report relied heavily on origination, home sales, and other analytics information.

""Although recent economic indicators report improvements in various sectors,"" it said, ""overall indicators associated with mortgage fraud ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô such as foreclosures, housing prices, contracting financial markets, and tighter lending practices by financial institutions ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô indicate that the housing market is still in distress and providing ample opportunities for fraud.""

Several states saw the most known and suspected mortgage fraud activity. The most prevalent fraud occurred in Arizona, California, Georgia, Michigan, Nevada, New Jersey, New York, and Texas.

Loan origination, real estate investment, equity skimming, short sale, and builder bailout schemes, among others, topped the most common ways in which perpetrators committed mortgage fraud, allegedly or otherwise.

According to the report, loan origination schemes accounted for most of mortgage fraud activity, rounding out at 62 percent of all cases. Title, escrow, and settlement fraud followed with 14 percent. Fraudulent activity involving commercial real estate loans, short sales, and builder bailouts came out to much less of the share, amounting to 4 percent for both loans and sales and 2 percent for the latter.

The FBI said that CoreLogic also found increasingly ""well-hidden"" instances of mortgage fraud activity, with lenders saying short sales and closing agent embezzlement had seen upticks.

The FBI's report arrives on the heels of a recent scheme it unveiled in New York. The bureau ""filed"":https://themreport.com/articles/14-indicted-over-58m-mortgage-fraud-payout-2011-08-10 five indictments against nine brokers and four lawyers, plus one disbarred attorney, over $58 million extracted in fraudulent loans and property transactions.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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