Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (34163)	9/22/2008 11:41:27 AM
From: sylvester80	Read Replies (1) \| Respond to of 149317

Mortgage Fraud Rampant [ed: RAMPANT means a LOT!] portfolio.com May 16 2008 6:44PM EDT Mortgage Fraud Rampant In my post on Wednesday, I questioned the claim that the dollar value of mortgage fraud was surging, arguing that firms had just become more aware of fraud and filing more suspicious activity reports, but catching on to fraud before the loan was finalized. In the comments, Ann Fulmer, vice president of Interthinx, a firm that tracks mortgage fraud, disagreed with me wholeheartedly. Her main point was that many banks and lenders aren't required to file suspicious activity reports with the FBI, so the Bureau's numbers aren't reflective of the real trend. Here is more from an email she sent me: We screen mortgage applications for indications of fraud and have not seen a slow down even though origination volumes are down, which suggests that fraud is increasing. Our numbers reflect the fact that fraud is shifting from a crime of profit to a crime of desperation as mortgage professionals whose livelihood is dependent on closing the sale and mortgage get "creative" in an effort to maintain their income, and as borrowers who must now have W-2 income and a substantial down payment get "creative" (with the assistance of said professionals) in order to qualify. It may be true that some of the increase is an artifact of better reporting by lenders, but as I posted in my comment to your article, the FBI numbers are significantly understated because only 1/3 of lenders are required to file SARs (the basis for the FBI report), many lenders do not recognize or report fraud when loans go into default, and the dollar loss reported is only the direct loss to lenders and doesn't account to the collateral damage to neighborhoods and local governments. Interthinx also recently said that it uncovered $11 billion worth of fraud in mortgage applications. I'm sympathetic to Fulmer's claims, but I'm not 100 percent convinced. The $11 billion figure is associated with applications and not actual loans, and the reporting problems described in her comments seem like they might exist throughout all years and are not specific to the last year. Fulmer got into the mortgage fraud industry in a very interesting way. You can read more about her here.

To: tejek who wrote (34163)	9/22/2008 11:43:36 AM
From: sylvester80	Read Replies (1) \| Respond to of 149317

Mortgage fraud still rampant across U.S. [ed: Rampant means A LOT!] Kenneth Harney Sunday, August 31, 2008 (08-31) 04:00 PDT Washington -- You might assume that with home purchases and new mortgage volume off by 30 percent or more in many markets during the past year, loan fraud would be down as well. Wrong. A benchmark quarterly study released Monday by the mortgage industry's principal compiler of fraud reports, the Mortgage Asset Research Institute, found that the number of cases jumped by 42 percent between the second quarter of 2007 and the same period this year. They ranged from fabricated income verifications and credit reports to falsified employment records, financial assets illegally "rented" to buyers to beef up their loan applications, inflated appraisals, straw-buyer scams and a wide variety of hanky-panky schemes among sellers and purchasers designed to fool lenders. The highest numbers of fraud reports in the second quarter came from Florida, California, Maryland, Illinois and Michigan. Tough market conditions appear to actually increase pressures to commit fraud, says Merle Sharick, the institute's vice president. "Mortgage fraud used to be a crime of opportunity," he said in an interview. "Now it's a crime of necessity for people who are desperate to maintain lifestyles they became accustomed to" during the housing boom years. The Internet is a key facilitator of their activities, Sharick said, with dozens of sites online hawking fake income and employment verifications, tax filings, credit scores, deposit verifications and other forms of deception. Some individuals have begun using free community advertising services such as Craigslist to promote their wares, such as bank deposits that are available to home loan applicants to claim as their own on mortgage applications. In fact, the deposits remain in the total control of the scammers; only the account identification is changed for a short time. Job verification online One Web promoter recently blitzed loan officers with e-mails touting "pay stub and job verifications - show the income you need on paper." Recipients were directed to submit requests by text message. A Web address also was listed, but was not working when I tried it. A scam that recently popped up online involved promoters trolling the Web for straw buyers - people with good credit scores and incomes who rent their names and asset verifications for home purchases by unqualified buyers. In one case, said Sharick, straw buyers were offered $7,500 per transaction for their financial identities. Legal title subsequently was transferred from the straw buyer to the actual purchasers, who otherwise would have been rejected by the lender. Web-based crooks tend to be nimble, creative and technologically savvy. The institute and private lenders may flag online vendors to the FBI or state financial crimes investigators. But by the time they home in on the site, the sponsors often have covered their tracks electronically. Some vendors try to skate to the edge of the law - selling pay stubs and employment verifications or the software to manufacture them in bold print - but in fine print disclaiming any connection with improper uses of the documents or software. Novelty items for sale One site characterized its pay stubs as "novelty" products. "Although these stubs are authentic looking and will FOOL ANYONE - EVERY TIME," said the site, the pay-stub software being sold is "not intended to be used to acquire a mortgage" or other types of loans. At the other end of the spectrum, low-tech records systems maintained by some counties sometimes allow scam perpetrators to file faked documents that give them effective control of properties - at least temporarily - according to Sharick. "There are 3,800 county courthouses out there," he said, many of them with outdated systems, low budgets and staff, and minimal defenses against sophisticated con artists. "For a $10 filing fee, 9 out of 10 times (in those counties), they'll file whatever you want" - for example, a faked lien-release from a bank or mortgage company indicating that the debt against a property has been paid, and there is no further lien against the house. That, in turn, opens the door for criminals to load large amounts of new mortgage debt against the property with faked identities, or even to sell it for cash. Other scam artists have begun hijacking the identities of well-respected and law-abiding professionals - appraisers in particular - then submitting bloated valuations to squeeze higher mortgage amounts out of lenders. One bank flagged an appraiser on nine inflated valuations in its portfolio, according to Sharick. But even though the letterhead and documentation were identical to the appraiser's, he had not performed any of the appraisals. The scammers had scammed him as well as the bank. E-mail Kenneth Harney at kenharney@earthlink.net. sfgate.com This article appeared on page K - 6 of the San Francisco Chronicle