Even though it is a little late to the game, the US Justice Department recently announced that they have made over 500 arrests for mortgage fraud since March in a nationwide crackdown. What is interesting to learn about is the varying number of ways that mortgage fraud can happen - and in different parts of the country, different schemes happened that all can be covered under the umbrella of mortgage fraud.
In Chico, California one of the larger home builders in the area had a growing inventory of homes as the housing market started cooling off in 2006 and decided to sell the homes to buyers and then rebate tens of thousands of dollars on each home to companies that were controlled by the buyers agents. The mortgage lenders were unaware of the rebates because they were not disclosed in the transaction and now many of the homes are in foreclosure.
Straw buyer schemes have also been popular in Detroit - where investigators uncovered a scheme where people posed as mortgage brokers, appraisers, real estate and title agents. The various people involved recruited straw buyers and were able to get lenders to loan out more than $100 million on over 500 mortgage transactions.
And in Florida, the former head of one of the largest privately held lenders in the country was arrested and charged in a 16-count indictment alleging that that he participated in a $1.9 billion fraud scheme that contributed the failure of Colonial Bank last year.
Is the crackdown on the various forms of mortgage fraud across the country too little too late? Maybe. But I learned long ago that it is better late than never.