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.”