The Federal Bureau of Investigation received more than double the number of mortgage-related “suspicious activity reports” from 2003 to 2004.

Common mortgage fraud schemes include:

  • Property Flipping – Property is purchased, falsely appraised at a higher value, and then quickly sold.
  • Inflated Appraisals – An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender. The report inaccurately states an inflated property value.

Mortgage fraud indicators include:

  • Inflated Appraisals – Exclusive use of one appraiser
  • Increased Commissions/Bonuses – Bonuses paid (outside or at settlement) for fee-based services and/ or higher than customary fees

Mortgage fraud is growing and moving from cities to more rural areas and appraisals using fraudelent information is an important component.

If you look at what causes fraud, it’s a case of economics,” said Bill Matthews, vice president of Reston, Va.-based Mortgage Asset Research Institute, “If you have a frothy market it causes fraud to go undetected.”

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5 Responses to “FBI sees double the Suspicious Activity Reports”

  1. Ashish Shah says:

    Does anyone have data on mortgage fraud in New York City?

  2. Dave Platter says:

    That would be interesting to see. I wonder if the fact that NYC is 80% cooperative has much impact on whether there is appraisal fraud or not.

  3. ralph roberts says:

    Sickened By Fraud, A Real Estate Appraiser Turns In His Pencil by Blanche Evans

    It may be a sign that the housing party is coming to an end. Rampant fraud has at least one appraiser turning in his pencil, and he’s on a rant.

    Texas appraiser Bob Burnitt says “Durn it!” He’s sick of fraud.

    “I have only practiced real estate appraisal in the state of Texas, but in my 53 years of being on this planet, without a shadow of a doubt, real estate appraisal is the most corrupt ‘profession’ I have ever seen,” says a disgusted Burnitt. “It is my belief at this point it is no different in any other state.”

    Unfortunately, it does seem to be human nature for people to want to take the easy way out in many occupations and trades – just look at how our country rewards politicians who lie, and looks the other way from the criminal actions of business leaders. The Justice Department moves slowly to prosecute white collar criminals, mainly because the miscreants can hire lawyers capable of bankrupting the nation with delays, hearings and appeals. Just ask the SEC where it would start if it were going to investigate every CEO who covers the inflation of earnings. The stock market would have to close for years.

    The mortgage lending/real estate appraisal business is the absolute bottom, says Burnitt.

    “I have lost every single ‘good’ client I have ever had for the same ‘reason,’ laments Burnitt. “Sooner or later, I do an appraisal that doesn’t ‘make value’ and that is it, I’m fired. Time and time again. During the so-called “re-fi boom” loan officers absolutely demanded that I either lie or inflate an appraisal for them. When I tell them I can’t do that, it is unethical and illegal, they just hang up the phone and call my competition.”

    Being fired several times a week for simply following the rules is something he can’t take anymore. “It never stops,” Burnitt says, “Well, actually it has slowed down a lot, because I have finally gotten on enough black lists that my phone just doesn’t ring anymore. So I have decided to make it easy on myself and simply decline all further assignments. I have dropped my membership to the Board of Realtors, and, of course, the MLS.”

    The Realtors are as much to blame as anyone else for this awful situation, he says. They want appraisals to meet asking prices, too.

    Burnitt didn’t throw in the towel before trying to do something about the situation, but he says his congressman and state representative looked the other way. They claim there is no money to pursue the problem, he says.

    “I have met face-to-face with my Congressman (Joe Barton) and supplied him with plenty of documentation that loan fraud and inflated, fraudulent appraisal practices are rampant, and his was reply was, ‘Oh, that’s just human nature, I can’t do anything about it.” Well so is any other kind of theft, but we at least try to enforce the law when it comes to that. It seems to be OK with Congressman Barton to steal with a pencil.

    “My State Representative, Jim Pitts, is equally aware of this situation. Same reaction, “can’t do anything about it”. My State Senator, Jane Nelson, has also been advised of this situation as well. Believe you me, I have kept files of my correspondence with these people,” says Burnitt. “I only hope I am still around to make sure they can’t claim ignorance the next time we have a real estate lending crash. And we will have one, it is inevitable. It is not a matter of if, it is just when.”

    Burnitt plans on beating the I-told-you-so drum loudly.

    “It is misleading to appraisers, and really, much worse than that, misleading to taxpayers and stockholders in Fannie Mae and other lending institutions for there to be a Texas Appraiser Licensing and Certification Board, and a Texas Real Estate Commission to be in place that is allowing these crooked practices to flourish,” says Burnitt. “The Texas Association of Realtors deserve plenty of blame as well. Lets not forget the Texas Savings and Loan Department, they are the ones that license the Mortgage Brokers and Loan Officers. All of these agencies and associations are aware of the situation and are simply looking the other way. Our elected officials are looking the other way as well.”

    “The other night, I watched a television documentary on one of the major networks regarding the dangerously ballooning unsecured credit card situation. It was pretty much the same old thing, but one part of the story got my attention, and confirmed what I believe is the powers-that-be’s “real and true policy’ regarding banking and the economy in general. What got my attention in this story was, the State of California’s Attorney Generals Office went after some of the lending institutions for their unfair, dishonest, and illegal practices regarding the credit card business. The OCC, the Office of the Comptroller of the Currency came after the California Attorney Generals office and made them back off!

    “Once more it has been confirmed to me that as long as the economy “train” is on the track, nobody’s going to do nuttin’, honey,” says a disgusted Burnitt. “That is just the way it is, and it is the way it is going to be.”

    Published: January 17, 2005

  4. jerry baker says:

    I wonder if Mr. Burnitt or anyone else has any information (evidence) where local school boards and appraisal districts are in collusion to inflate property values so that property taxes are inflated? That seems to be a serious issue in at least some parts of East Texas. Any information would be appreciated. Regards.

  5. Bob Burnitt says:

    It has been my experience that most of the time, when people complain the appaisal district has their property “valued” too high, I can ask them if they would take that amount for their property and 99 times out of 100 they will say no. So they really don’t have a leg to stand on.

    I have done most of my appraisals in a 14 county area in North Texas. Some of the counties appear to be right on and some of them are not. Some of the counties I have worked in couldn’t hit a bull in the a– with a bass fiddle.

    If they have you valued too high, get your data together to prove otherwise and go to the ARB.

    You could hire a Certified Real Property Tax Consultant to advocate for you but that will probably cost more than the tax.

    Bob Burnitt Former Real Estate Appraiser