FBI 2010 Mortgage Fraud Report Finds Florida Top Mortgage Fraud State in the Nation, Tampa and Miami Top for Mortgage Fraud in the USA

Posted By on August 18, 2011

The Federal Bureau of Investigation keeps track of all sorts of crime, including Mortgage Fraud, and every year since 2006 it releases its annual report on how bad mortgage fraud is in the United States.  This week, the FBI’s 2010 Mortgage Fraud Report was released, and Florida took the top spot.  Surprise.  (Go here to read or download the complete FBI Mortgage Fraud Report in pdf format.)

What is Mortgage Fraud?

According to the Federal Bureau of Investigation “mortgage fraud” involves “… a material misstatement, misrepresentation, or omission relied on by an underwriter or lender to fund, purchase, or insure a loan. This type of fraud is usually defined as loan origination fraud. Mortgage fraud also includes schemes targeting consumers, such as foreclosure rescue, short sale, and loan modification.”

Florida is Number One in Mortgage Fraud Says the FBI

The FBI Mortgage Fraud report gives all sorts of information that citizens need to know.  The different types of mortgage fraud: bank fraud, appraiser fraud, title fraud, loan servicer fraud, fly by night foreclosure negotiators, shady foreclosure defense companies: there are many different players in the current Foreclosure Fraud crisis.

It also reports that within the State of Florida, the top two communities with the most rampant mortgage fraud are Tampa and Miami.  There are 177 pending mortgage fraud cases for 2010 in the FBI’s local field office with Miami having 92 in the year 2010.

This won’t end soon, either.  In 2008, the FBI saw an increase in mortgage fraud of 90% and in 2009, mortgage fraud increased another 12%.   The most common frauds? Loan originations that are phony.  Applications are backed by fake income through inflated income and the like.  Coming in a close second, what the FBI calls “fraud for profit,” where  appraisals are jacked up with inflated market values and loan documents are falsified.

What the FBI Has Found – Predicting the Future From the Report

The Federal Bureau of Investigation has been releasing these Mortgage Fraud reports for several years.  Here are the FBI’s Key Findings from its 2010 investigation and analysis:

Mortgage fraud continued at elevated levels in 2010, consistent with levels seen in 2009. Mortgage fraud schemes are particularly resilient, and they readily adapt to economic changes and modifications in lending practices.

Mortgage fraud perpetrators include licensed/registered and non-licensed/registered mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives.

Total dollar losses directly attributed to mortgage fraud are unknown.

A continued decrease in loan originations from 2009 to 2010 (and expected through 2012), high levels of unemployment and housing inventory, lower housing prices, and an increase in defaults and foreclosures dominated the housing market in 2010. RealtyTrac reported 2.9 million foreclosures in 2010, representing a 2 percent increase in foreclosures since 2009 and a 23 percent increase since 2008.

Analysis of available law enforcement and industry data indicates the top states for known or suspected mortgage fraud activity during 2010 were California, Florida, New York, Illinois, Nevada, Arizona, Michigan, Texas, Georgia, Maryland, and New Jersey; reflecting the same demographic market affected by mortgage fraud in 2009.

Prevalent mortgage fraud schemes reported by law enforcement and industry in FY 2010 included loan origination, foreclosure rescue, real estate investment, equity skimming, short sale, illegal property flipping, title/escrow/settlement, commercial loan, and builder bailout schemes. Home equity line of credit (HELOC), reverse mortgage fraud, and fraud involving loan modifications are still a concern for law enforcement and industry.

With elevated levels of mortgage fraud, the FBI has continued to dedicate significant resources to the threat. In June 2010, the Department of Justice (DOJ), to include the FBI, announced a mortgage fraud takedown referred to as Operation Stolen Dreams. The takedown targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in combating mortgage fraud.

The current and continuing depressed housing market will likely remain an attractive environment for mortgage fraud perpetrators who will continue to seek new methods to circumvent loopholes and gaps in the mortgage lending market. These methods will likely remain effective in the near term, as the housing market is anticipated to remain stagnant through 2011.

What Can You Do to Protect Yourself From Mortgage Fraud?

Whether you are fighting a foreclosure or in an underwater mortgage, or if you are considering buying or selling a home in South Florida, it is extremely important to find reputable professionals to help you – and in these times, it might be wise to include an experienced Florida real estate attorney with foreclosure defense and short sale experience as a member of your team.

No one goes into a transaction knowing they are being cheated: that’s the job of the con artist, to gain confidence.  Given the FBI’s report and its predictions, having an attorney double-check even the most trusted companies and individuals may save you a lot of grief in the future.

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