Today's Mortgage Rates

Think mortgage fraud is something that happened in the past?

Think again. Mortgage fraud still exists and according to the latest statistics from MARI, it has actually risen in some areas of the country.  CNN Money has recently published the top 10 states for mortgage fraud and many of the usual suspects are still on there. Three “sand states” (Florida, Arizona, California) are all in the top 10 and according to the experts, even the numbers that are reported may be under-stating the problem.

“We believe that mortgage fraud is significantly understated…”

Were the words of Jennifer Butts of LexisNexis Mortgage Asset Research, the numbers may actually be under-stated because fraud isn’t usually detected until a loan goes bad.

Another thing to note is that the face of mortgage fraud has changed as the housing market has changed. As the market has turned, mortgage fraud is not the same type of mortgage fraud that was happening during the housing boom.

The nature of fraud has changed somewhat since the housing bust, according to Denise James of LexisNexis Risk Solutions. “New trends continue to emerge,” she said.

The scammers then turn around and sell the homes to straw buyers, financing the sales with inflated appraisals. They get, say, an appraisal of $100,000 for a house worth $30,000. When the deal closes, they take the cash and walk away, failing to make any payments. That sticks the banks with properties worth far less than they gave out in mortgage loans.

With more than a million foreclosures expected to happen in 2010, it is clear that mortgage fraud is not helping solve the mortgage problem and is only contributing to it. Will the regulators be able to help curb mortgage fraud going forward? It doesn’t look very promising from my point of view.

Justin McHood recently wrote about whether or not Congress would extend the federal tax credit for home buyers. Many people have legitimately benefited from being able to claim the credit on their income tax returns, and there have been calls to extend it to more Americans.

However, government investigators say over 100,0000 taxpayers have fradulently filed for the credit. About 19,000 people who filed for a total of $139 million in tax credits didn’t even buy a home, while about 74,000 filed $500 million in claims even though they didn’t qualify as a first-time homeowner, according to an article in the Wall Street Journal.

At least one of the filers was only 4 years old, J. Russell George, the Treasury inspector general for tax administration, told Congress this week.  The names of more than 500 people under 18 were on applications for the tax credit. In most of those cases, parents of the children filed the claims because their incomes were too high to claim it themselves.

So what happens to the people who attempted to commit fraud by filing the claims? They could be prosecuted and their tax preparers could face criminal charges.

While some opponents of the tax credit may see this as another reason not to extend the program, others say that more safeguards should be put in place to deter fraud if the program is continued.

Charges were filed against 41 people accused of mortgage fraud in connection with 100 properties in New York State.

Federal prosecutors charged the mortgage lenders, attorneys and others in the real estate industry with wire fraud and conspiracy fraud, according to the New York Times. Most of those charged were arrested or surrendered in New York, Pennsylvania and North Carolina.

The accused allegedly obtained more than $64 million in mortgage loans connected with the New York properties in eight separate cases. Scams included falsifying mortgage applications, stripping home equity and flipping properties.

Some of the people targeted by the New York scams were homeowners who faced the threat of foreclosure or were struggling to make mortgage payments. These cases are just some of the mortgage fraud schemes happening around the country these days.

If you own a home and are having a tough time paying on your mortgage loan, be careful who you do business with. Be skeptical of people you don’t know who show up on your doorstep or call offering to solve your mortgage woes.  Do not get involved in schemes that require you to sign over the title to your property or buy a home you do not intend to live in.

If you need help managing your mortgage payments, contact your loan servicer to discuss your options. The Department of Housing and Urban Development (HUD) also has mortgage counselors available to work with borrowers.