As mortgage lenders accumulate losses from foreclosure listings and as they implement stricter processes and more requirements for loan applicants, incidents of loan fraud have started to increase.
According to LexisNexis Service’s Mortgage Asset Research Institute (MARI), the number of mortgage fraud incidents has risen to record levels in the first months of 2009. As more and more lenders are limiting their mortgage loan approvals because of their apprehensions about foreclosure listings, incidents of loan fraud soared in 2008 by 26 percent from fraud figures in 2007.
Denise James, director for residential mortgage solutions at LexisNexis, said the large numbers of foreclosure listings, the reduced number of approved loans and the economic downturn have been forcing more and more people to commit loan fraud.
MARI’s data showed that Rhode Island had the highest mortgage fraud rate in the first months of 2009. For the first time in years, Rhode Island entered the top ten ranking in number of fraud compared to number of loan originations in the state.
Meanwhile, Florida, the second state with the highest rate of foreclosure listings in 2008 and in January 2009, has posted the second highest rate of loan fraud in the first months of 2009. In 2007 and in 2008, it led fraud rankings, now led by Rhode Island.
James of MARI said that in 2008, the most dominant type of home loan fraud was application form fraud. Around 61 percent of recorded frauds in 2008 involved the use of fraudulent information on application forms.
The second most frequent type was the use of fraudulent financial statements and tax returns. This type represented 28 percent of all frauds in 2008. The third was inflation of property appraisal. The other fraud types include misrepresentation of information on deposit, employment and credit documents.
James also said fraud incidents related to foreclosure listings are increasing. Scammers and swindlers are enticing distressed homeowners with offers of loan modifications that never happen. Some cons even persuade borrowers to give them their deeds to the property so they could modify their loans faster.
Furthermore, fraud incidents involving older and immigrant homeowners are increasing. Scammers take on the identities of immigrant and elderly renters and then apply for mortgage loans. They pay for just a few months and then live in the properties rent-free after the homes are added to foreclosure listings.
Related Posts:
- Avoiding Mortgage Fraud
- Fighting Foreclosure Fraud
- Broker Sentenced for Fraud That Caused Some Foreclosures
- Mortgage Fraud in 2007 up by 42%
- Georgia Foreclosure Listings Grow as Bad Bank Loans Rise
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