Mortgage Fraud Escalating, FBI Reports

In its just released “2008 Mortgage Fraud Report ‘Year in Review,’” the Federal Bureau of Investigation reports that mortgage fraud “continued to be an escalating problem in the United States during 2008.” 

The FBI noted that SAR mortgage fraud filings from financial institutions increased 36 percent to 63,713 during Fiscal Year (FY) 2008 compared to 46,717 filings in FY 2007. Although the total dollar loss attributed to mortgage fraud is unknown, the FBI reported that at least 63 percent (1,035) of all pending FBI mortgage fraud investigations during FY 2008 involved dollar losses totaling more than $1 million.

Among the other significant news in the report:

-- The top states for mortgage fraud during 2008 were California, Florida, Georgia, Illinois, Michigan, Arizona, Texas, Maryland, Missouri, New Jersey, New York, Ohio, Colorado, Nevada, Minnesota, Rhode Island, Massachusetts, Pennsylvania, Virginia, and the District of Columbia. Rhode Island, Massachusetts, Pennsylvania, and the District of Columbia were new to the list in 2008, replacing Utah, Indiana, Tennessee and Connecticut from 2007.
 
-- The FBI believes that the downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate. Significantly, the FBI warned that several of these schemes have the potential to spread if the current economic downward trend continues. The FBI referenced the “old schemes” as including property flipping, builder-bailouts, short sales, and foreclosure rescues, and the “new schemes” as including reverse mortgage fraud, credit enhancements, condo conversion, loan modifications, and pump and pay in response to tighter lending practices.