Mortgage fraud continues to escalate as troubles in the housing sector deepen. According to the ""2008 Mortgage Fraud Report"":http://www.fbi.gov/publications/fraud/mortgage_fraud08.htm released this week by the ""Federal Bureau of Investigation"":http://www.fbi.gov (FBI), fraud can be blamed for ""billions of dollars in losses in the mortgage industry.""
The FBI reported, mortgage fraud Suspicious Activity Reports (SARs) referred to law enforcement increased 36 percent to 63,713 during fiscal year (FY) 2008, compared to 46,717 reports in FY 2007.
While the total dollar loss attributed to mortgage fraud is unknown, the agency said, financial institutions reported losses of at least $1.4 billion - an increase of 83.4 percent from FY 2007. Sixty-three percent (1,035) of all pending FBI mortgage fraud investigations during 2008 involved dollar losses totaling more than $1 million.
Last year, the western region of the United States claimed the most FBI mortgage fraud investigations. The top 10 mortgage fraud states were California, Illinois, Texas, Georgia, Ohio, Colorado, Maryland, Florida, Missouri, and New York. The agency also identified Rhode Island, Massachusetts, Pennsylvania, and the District of Columbia as new territories experiencing significant mortgage fraud problems.
The FBI said criminals continued using old schemes in 2008, including property flipping, builder-bailouts, short sales, and foreclosure rescues. Additionally, in response to tighter lending practices, they facilitated new schemes, such as reverse mortgage fraud, credit enhancements, condo conversion, loan modifications, and pump and pay.
The FBI states in its report, ""Mortgage fraud trends in 2008 reflected the overall downturn in the US economy initiated by the subprime mortgage crisis of 2007,"" which ""uncovered and fueled a rampant mortgage fraud climate.""
The agency warns that federal stimulus programs and the proliferation of Federal Housing Administration (FHA) insured mortgages are providing new funding streams for perpetrators.
According to the FBI, a growing number of fraud schemes are being conducted by industry professionals who are in a position to exploit the current depressed housing market and pull off fraud across multiple jurisdictions as foreclosures increase, access to credit diminishes, and more homeowners are unable to sell or refinance their homes. The agency says properties affected by these schemes have a negative impact that reverberates to just about every corner of the mortgage industry - including federally insured loan programs, secondary market investors, and homeowners and their neighborhoods - and leaves a black mark on the overall national economy.
Another key finding in the FBI’s report was that more than 3.1 million foreclosure filings were reported on approximately 2.3 million properties nationally during 2008, up 81 percent from 2007 and 225 percent from 2006.
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