Mortgage fraud is a growing threat to homeowners and businesses, according to the Federal Bureau of Investigation.
With the changing housing landscape come new schemes. Foreclosures and delinquencies have soared over the last few years, and the FBI says that has resulted in an increase in mortgage fraud schemes against distressed homeowners. New original loan fraud investigations, on the other hand, have dropped since there was a decrease in new mortgages in 2011.
Mortgage fraud schemes have “some type of material misstatement, misrepresentation, or omission relating to a real estate transaction which is relied on by one or more parties in the transaction,” according to the FBI website. It can include foreclosure rescue and loan modification frauds and illegal property flipping. Those accused of committing the crimes can be bank officers, appraisers, mortgage brokers, attorneys, loan originators or borrowers.
Cindi Dixon, CEO of Mela Capital Group,a mortgage quality control risk management firm, says the most common frauds continue to be income and employment misrepresentation and occupancy fraud — where there is deception about whether a home is owner-occupied or an investment property.
However, over the last 12 to 18 months, she’s also seen trends in mortgage fraud emerge. They include land-title lien fraud, which involves liens that are recorded fraudulently on properties and illegal transfers of ownership, and organized crime fraud, which involves organized fraud rings purchasing properties under straw-buyers names and using the homes for crimes like drug and human trafficking and credit card manufacturing. False identity use to purchase a home is also growing, she said.
Dixon thinks many of the frauds are driven by the market conditions.
"With economic downturns people struggle to maintain current income levels. This leads to new and creative ways of supplementing income and exploiting the system for profit," she said.
Dixon noted that 15 percent of the overall frauds are committed by an individual homeowner or home-buyer, and 85 percent tend to involve some type of insider collaboration that can include the real estate agent, mortgage broker, banker or other person involved in the mortgage process.
For a look at the top states in the U.S. for mortgage fraud, CNBC analyzed the most recent data from the FBI and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).*
So what are the top states for mortgage fraud? Click ahead to find out.
By Michelle Fox
Posted 2 April 2012
Note: The FBI’s mortgage fraud index looks at the areas most affected in 2010. It incorporates a number of indicators, including statistics from the FBI, the Department of Housing and Urban Development-Office of Inspector General, FinCEN, LexisNexis-Mortgage Asset Research Institute, Interthinx, Fannie Mae, Radian Guaranty, CoreLogic, the U.S. Census and Department of Labor. The index ranges from 1 (best) to 100 (worst).
*FinCEN’s most recent statistics focus on suspicious activity reports (SARs) filed in the third quarter of 2011. SARs are filed by financial institutions against a person thought to be conducting suspicious activity. The reports were filed between July and September 2011, and the suspicious activity occurred on or after January 1, 2009.