Tag Archives: Fraud

In the third quarter of 2011, mortgage lawsuits reached their highest level since the Mortgage Litigation Index began tracking them in 2007; however, lawsuits involving servicers declined over the quarter. The index, tracked by MortgageDaily.com and prepared along with Patton Boggs LLP, observed 218 cases over the third quarter, up from 190 the previous quarter and 151 in the same quarter last year. Litigation against servicers dropped from 65 cases in the second quarter to 51 cases in the third.

Mortgage modification scams made the list of ""Top Ten Scams of 2011,"" assembled by the Better Business Bureau (BBB). Because the federal government announced or expanded several mortgage relief programs this year, the BBB says all kinds of sound-alike websites have popped up to try to fool consumers into parting with their money. Scammers are representing themselves as government agencies or the BBB itself in order to gain consumers' trust.

At the height of the financial crisis in 2008, Fannie Mae and Freddie Mac held $2 trillion in high-risk subprime loans, amounting to 42 percent of their single-family portfolios, according to Edward Pinto of the American Enterprise Institute. Pinto, who served as chief credit officer for Fannie Mae until the late 1980s, arrived at this number by relying on data from the Securities and Exchange Commission (SEC), which filed a lawsuit against six former GSE executives for fraud.

Six former executives at Fannie Mae and Freddie Mac are now facing securities fraud charges for making misleading statements about the companies' holdings of subprime loans between March 2007 and August 2008. The Securities and Exchange Commission (SEC) alleges they fed the markets false information about the amount of risk on each company's books. Both GSEs entered into non-prosecution agreements with the SEC and have agreed to cooperate in the litigation against their former executives.

After filing criminal charges about a month ago against two title officers employed by Lender Processing Services, Nevada Attorney General Catherine Cortez Masto has filed complaints against three additional notaries. The new defendants allegedly filed fraudulent notices of default with the Clark County Recorder's office after notarizing the signature of persons not in their presence. A fourth notary reportedly struck a plea deal with the attorney general after admitting to notarizing about 25,000 fraudulent foreclosure documents.

Attorneys General Kamala Harris of California and Catherine Cortez Masto of Nevada have entered into a joint investigation alliance targeting mortgage servicers and perpetrators of mortgage fraud. The alliance will link their offices' civil and criminal enforcement teams in order to speed up investigations and prosecutions. The partnership forged between Harris and Masto illustrates the deep rifts that have developed within the attorney general camp over robo-signing settlement negotiations.

While the government has recently enhanced its efforts to fight mortgage modification scams, mortgage fraud remains a prevalent issue throughout the industry. According to Jenny Brawley, associate director of mortgage fraud investigations for Freddie Mac, three elements drive mortgage fraud schemes: pressure, opportunity, and rationalization. The FBI characterizes mortgage fraud schemes as ""particularly resilient"" and credits them with being able to adapt to economic changes and modifications in lending practices.

Three government agencies are combining efforts to address mortgage modification scams through a joint task force. With the announcement of the task force, the participating agencies -- the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the Consumer Financial Protection Bureau (CFPB), and the Treasury Department -- released a consumer fraud alert to ensure homeowners understand that only their mortgage servicer has discretion to grant a loan modification.

While incidences of mortgage fraud have remained steady over the past six quarters overall, submissions of fraudulent employment/income information are on the rise, according to the latest Mortgage Fraud Risk Index by Interthinx. Employment/income fraud on mortgage applications increased 8.8 percent during the third quarter of 2011. The sharp turns in this category of fraud throughout the past few years reveal certain market occurrences.

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced Monday that it intervened to block 40 mortgage modification schemes advertised on Yahoo! and Bing. In response, Microsoft terminated 400 advertising contracts with the perpetrators of the schemes. Microsoft is the founder of Bing, and its technology backs Yahoo! Search. Monday's notice follows an announcement last week in which SIGTARP reportedly shut down 85 mortgage modification scams advertised on Google.