Sunday, December 04, 2005
'Zero Tolerance' For Lying Speculators
thehousingbubble2.blogspot.com
The LA Times reports on the burgeoning crackdown in the mortgage industry. "'Fraud for property' is the industry phrase used to describe usually honest folks who exaggerate their incomes or tell other white lies to obtain financing. Now lenders and the authorities are turning their attention to borrowers encouraged to falsify their applications by loan officers who tell them 'everybody does it.'"
"When those who use deception to obtain financing get in over their heads and can't, or won't, make their payments, their lenders stand to lose big too. Combine the possibility of a costly and sometimes lengthy foreclosure proceeding with ever-shrinking profit margins, and it's easy to see why lenders are becoming more interested in unmasking the guilty parties."
"According to Tom LaMalfa, managing director of (a) mortgage research firm, some are starting to perform occupancy checks 60 days after closing to make sure the borrower was not an investor who claimed to be an owner-occupant to avoid the extra 1 to 2 percentage points lenders charge for investor loans. Half the insurance claims made by lenders so far this year have involved occupancy fraud. Three out of four involve investors who simply don't want to pay higher rates, Prieston said."
"According to LaMalfa, some lenders are inserting clauses into their mortgage agreements that allow them to step up the interest rate if they discover that the borrower isn't occupying the house. 'It used to be, 'No harm, no foul,' said Ann Fulmer. 'Now, there's zero tolerance.'"
"A new company based in Dallas is developing a system that can tap into up to 20 public and private databases to alert lenders to the possibility that a borrower may not be occupying the house he is buying. For example, the fact that a borrower has multiple power company accounts is a 'good red flag' that he is really an investor, said Jeffrey Taylor, the firm's CEO."
"(The firm) also is developing 'income profiling' software that will allow lenders to determine whether an applicant is exaggerating his earnings, as well as a program lenders can use to make sure you are who you say you are. 'These public / private databases have been out there for years,' Taylor said. 'And we have figured out how to access them instantaneously.'" |
