Mortgage Fraud Activity Falls for the First Time in 16 Years

(LoanSafe.org) - Mortgage fraud activity fell nearly 30% in 2012, the largest drop in sixteen years!

The Financial Crimes Enforcement Network reported that mortgage fraud complaints have gradually picked up momentum since 1996, with approximately 46% of all complaints out of the last decade taking place within the past three years alone.

All fraud related activities made up 23% of all suspicious activities reports made by banking institutions last year.

The FBI reported that insider fraud played a huge role in bank failures in the last few years. Around 4% of cases involved real estate or mortgage brokers engaging in fraud.

Typical mortgage fraud activities includes using false information to obtain a loan one would normally not qualify for. The information that can be altered usually includes borrower income, occupancy, employment; submission of fraudulent or altered documentation; or violating their lending limit. This tactic also commonly involves straw-buyers.

Mortgage Fraud Report Findings from FinCEN

• Some accountant borrowers committed mortgage loan fraud on their own behalf by providing false financial or occupancy information with their loan application.

• In order to appear better qualified for a loan, some non-accountant borrowers committed mortgage fraud by altering documents that had been prepared by their accountant.

•Numerous SARs reported altered or falsified “CPA letters,” a requirement for approval of some mortgage loans. The filers generally did not explain whether the CPA, the borrower, or someone else, altered the documents.

• Mortgage loan fraud by accountants or CPAs also involved loan modification, debt elimination or short sale fraud schemes in cases of pending foreclosure.

• A credit union filed multiple SARs to report a local accountant/ owner of a tax preparation business suspected of structuring cash deposits and withdrawals. According to the indictment, the accountant helped clients of complicit realtors to obtain mortgage loans by creating fraudulent tax letters stating the borrowers had self-employment income and owned their own businesses. He and his employees also prepared fraudulent tax returns with the knowledge that they were not intended to be filed with IRS. The accountant’s fraudulent tax letters resulted in losses of more than $2 million in fraudulent loans to clients who had no ability to repay the loans. The individual pled guilty to conspiring to commit bank fraud and was sentenced to 2 years in prison.

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