“Fraud for Homes” Comes Under Greater Scrutiny
By Mariwyn Evans
Just in case you needed a “wowie” figure to make you feel even worse about the credit markets, try this one — mortgage fraud increased 139 percent between 2006 and 2007, according to a presentation I heard yesterday from Merle Sharick of the Mortgage Asset Research Institute. Even scarier is that the huge jump figure is based only on federally regulated lenders and doesn’t count all those state-chartered banks and mortgage brokers backed by private capital sources.
It also surprised me that, according to Sharick, lenders are beginning to pay more attention to what he called “fraud for housing.” Unlike “fraud for money,” which gets most of the attention from the FBI, fraud for housing can be as simple as a real estate practitioner “forgetting” to show
the reduced sale price in the MLS so the buyer can get a big enough loan to make the deal.
In a market where home prices were rising and sales were strong, such frauds were largely ignored so long as a borrower continued to make mortgage payments, says Sharick. But now, lenders, worried about falling home prices and underwater borrowers, are starting to take notice.
So, no matter how deserving the buyers, resist the temptation to “just help them out.” Otherwise, you may regret it.
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