Foreclosures And Mortgage Frauds

Posted in Foreclosures, December 25th, 2007 |

Organized mortgage frauds located in Atlanta seem to be a plausible explanation for the rising numbers of Atlanta foreclosures. The Wall Street Journal has reported how a fraud caucus managed to pocket $6.8 million in mortgages from Bear Stearns. A certain New York couple approached the bank with the story that they earned more than $50,000 per month as top ranking personnel of a marketing firm. They submitted statements showing assets worth $3million. In actual life the man was had an income of $105,000 per year with assets worth not more than $35,000! His wife did not have any outside income. Such a couple purchased a mansion and sold it in a foreclosure auction. Neighbours smelt a rat that led to the exposure of this foreclosure fraud ring.

According to the FBI, 28% of the mortgage agents and analysts are engaged in fraudulent activities. In 2003 the number was 7%. Lenders should know their rights and file Suspicious Activity Reports as soon as they suspect anything. Between 2000 and 2006 the reports have increased by 700%. There were 436 mortgage fraud cases in 2003. That has gone up to 1,210 this year – that is 2007.

The Prieston Group provides mortgage fraud insurance. According to their chairperson Arthur Prieston, losses from mortgage fraud in 2006 could be about $4.5 billion. It is a 100% rise from the 2005. The statistics for 2007 have not been released as yet. This organized racket is adding fuel to the fire of foreclosures. Prieston is of the opinion that in some regions more than half the foreclosures might stem from these frauds. He blames the sub-prime system of loans as ‘liar’s loans’ because no documentation was required about income statements. People merrily lied and got loans that were used in an organized manner for speculation leading to the foreclosure fiasco of today.

The Mortgage Asset Research Institute is another firm dealing with fraud protection. It said that 60% of the stated income amounts were exaggerated by more than 50%.

The net result is that with these exposures people who are self-employed and rely on stated-income loans will find it difficult in the near future to get loans to buy houses. The antics of few criminals make life hard for the many honest hardworking folks.

The main things that this fraud affair has exposed that where were the watchdogs when all this was going on?