Mortgage Fraud: Not Declining Despite the Crisis
Mortgage standards for loans have increased drastically
. One would think that mortgage fraud would decline quickly, but surprisingly this is not the case. Mortgage fraud has continued to soar rather than decline. This is according to MARI (Mortgage Assistant Research Institute). Mortgage fraud is among the top reasons why crisis is happening right now. Many borrowers lost their houses to mortgage fraud.
According to the study conducted by MARI, the first quarter of 2008 held 42% more incidents of mortgage fraud than compared to 2007's first quarter. One can almost say that maybe people, especially those in the industry, are getting very desperate to find sales not matter the costs with this crisis going on.
The Mortgage Bankers Association says that loan applications right now are at its lowest in eight years. The rarity of the loan applications are naturally paired with the difficulty to close deals properly. Real estate professionals experience this the most. Real estate agents, loan originators, and appraisers of properties are all looking for clients just to keep their businesses running.
There is one thing making the situation even harder to handle. This is the underwriting standards' tightening to ease the delinquencies coming from existing borrowers and of course from foreclosures. The chain reaction does not just stop right here. It eventually goes through the credit scores of lots of applicants. At this point, many credit scores are ruined and are most likely never to get approved on most loans offered by lenders. Now, linking this thought with the ongoing crisis, this is where brokers, loan officers, and agents brew mortgage fraud. And the borrower, unsuspecting, takes the bait and eventually gets burned even further, sending their credit scores at a worse state than they are already.
The prevalent loan fraud type MARI has found has mostly something to do with an applicant's income and employment history. This is the easiest to tamper with, and most applicants are agreeable with stretching a few numbers in their incomes, allowing them to get bigger loans with the now exaggerated salaries that they have, thanks to the loan officers who assisted them. Every time this kind of incident happens, a mortgage fraud is committed by simply misrepresenting borrower credentials.
Another source of the mortgage fraud occurrences came from those types where liens, debts, and the like are concealed to avoid getting accounted for in the processing of a loan application. Again, this kind of misrepresentation allows the loan lenders to approve more applicants with higher loan amounts.
The other case of mortgage fraud apart from the other two mentioned above has something to do identity theft. In the State of Illinois alone, 6% of the mortgage fraud committed has something to do with identity theft. This kind of mortgage fraud is a little more serious in such a way that crime rings use a person's identity to get a loan. As soon as the loan is released, the people behind this will just disappear, with no intention of paying the loan.
Mortgage Fraud: Not Declining Despite the Crisis
By: John Roberts
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