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One in Every 200 Residential Loans Were Fraudulent

March 22, 2010 by Marco Santarelli

Nationwide, one in every 200 residential loans funded last year, totaling $14 billion, involved fraud, according to First American CoreLogic.  Despite what looks like an unsettling amount of shadiness lurking within the mortgage market, the company says the fraud rate has been steadily declining for the past three years and is now about 25 percent lower than when it peaked in the third quarter of 2007.

Since then, First American notes, lenders have been more aggressive in curtailing mortgage fraud – a prudent reaction considering banks have been forced to buy back billions of dollars in fraudulent loans sold to investors during the boom, when standards were lower and many loans were made without verifying the applicant’s information.  "In 2010, 2011, and 2012 you won’t see nearly the amount of [fraud] reports that you’re seeing today," said Tim Grace, SVP of fraud analytics at First American CoreLogic.

First American CoreLogic says 25 percent of foreclosures show fraud in the initial application, and as much as 70 percent of early payment defaults show indications of fraudulent activity in the application process.  The company’s conclusions are based on its analysis of 80 million loans passing through its proprietary national fraud data repository.

Filed Under: Financing Tagged With: fraudulent loans, Mortgage Fraud

Mortgage Fraud Claims Rise 42% in 2007

April 3, 2008 by Marco Santarelli

Reports of suspected mortgage fraud rose 42 percent last year as banks became more leery of lies on loan applications.

The Treasury Department's Financial Crimes Enforcement Network said Thursday that there were 52,868 reports for mortgage fraud in 2007, up from 37,313 a year earlier. Mortgage fraud reports were the third-most common type of suspicious activity.

The most common type of mortgage fraud was misrepresentation of income or assets, followed by forged documents, misrepresentation of a borrowers' intent to occupy a property as a primary residence occupancy fraud and inflated appraisals.

The Mortgage Bankers Association has called for more than $31 million over the next five years in new funding for the FBI and Justice Department to fight mortgage fraud, money that would go to new investigators and prosecutors.

This is just one of the reasons why most lenders today have pulled their stated-income loan programs, while others have raised the credit requirements to qualify for such loans.

Filed Under: Financing Tagged With: Mortgage Fraud, Real Estate Financing

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