Business wrongdoings just keep emerging, adding more bad news to an already depressed economy. Banks that misused funds, money managers who stole billions in client funds and a government entity which failed to catch any illegal business activity which was right in front of their face. And now, unfortunately, we can add mortgage fraud to this seemingly ongoing list.

Interthinx, a provider of fraud services and solutions for the mortgage industry, states that:

“Incidents of mortgage fraud rose 1,411% between 1997 and 2006, and doubled between 2004 and 2006 according to reports from The Financial Crimes Enforcement Network (FinCEN). FinCEN estimates the total loss to the industry at $1 billion to $6 billion per year, but notes that 93% of fraud reports filed did not quantify the actual loss. Industry experts now estimate that losses from fraud in Alt-A programs will top $218 billion. With Fannie Mae and Freddie Mac in federal conservatorship and the virtual disappearance of the secondary mortgage market, leaving the U.S. government as the largest investor in American mortgage debt, the risk of fraud has shifted to the GSEs, HUD, FHA and U.S. taxpayers.” 

FinCen’s report, Filing Trends in Mortgage Loan Fraud, highlights suspicious activity reports (SARs) from July 2002 to June 2008, along with an explanation of trends and patterns in activities leading to initial suspicion. In regards to the insurance aspect, FinCen states that:

“As in the case of mortgage loan fraud SARs referencing repurchases, SARs with references to insurers averaged 19 months between the activity and the SAR filing dates, compared to the average of 12 months between activity date and filing date for mortgage loan fraud SARs without these references.”

It is presumed that the number of mortgage fraud cases continue to rise as the current economic conditions breed such criminal activity. As news of mortgage fraud continues to break, we will continue to report it.

Emily Holbrook
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