Mortgage Fraud On The Increase

[May 29, 2008.]

 

For many a mortgage loan is really the only way to make home buying affordable. A mortgage is when the home buyer puts the home up as a security interest in order to secure a loan that will help pay for the property. A lien is placed on the home until the debt is paid off in full which can take as long as 30 years. Should the home owner default on payments then the lender, usually a bank, will begin foreclosure procedures.

Currently with interest rates at a record low and the housing market the worst that it has ever been many consumers are finding the time right to buy their first home. These people turn to mortgages in order to help them with the financial burden.

A recent report has shown that mortgage fraud has seen a sharp rise in 2007 with about 53,000 reports of fraud compared to a year earlier when only 37,000 fraud cases were reported.

Banks and loan agencies are becoming more and weary of new mortgage applications in an effort to sort out those borrowers who may be high risk. It would seem that the misrepresentation of income is the most common type of fraud being found followed by inflated appraisals. According to the Treasury Department the primary reason for such fraud is due to the mortgage broker’s inability to make certain that all information provided on the loan application was correct. The report by the Treasury Department went on to say that these brokers acted as “Intermediaries that did not verify information submitted.”

With mortgage rising almost 42% last year the states that lead the pack in fraud include Florida, Nevada, and Michigan. The majority of these mortgage fraud cases seem to be connected with “cash-out” refinancing. “Cash-out refinancing” is taken out on property already owned in order to pay off existing liens or to pay for any necessities.

In an effort to combat the growing number of mortgage fraud cases the Mortgage Bankers Association has requested over $30 million in funding to go towards investigations and prosecution of these cases.

With mortgage loans being so important it is important to make sure all information on the loan application is accurate and up to date in order to prevent fraud.