Friday, October 28, 2005

Up To 10% Of Mortgage Apps Include Fraud

Inman News has a report on the FBI and mortgage fraud. "'Mortgage fraud is a crisis in the making,' said James Burrus, deputy assistant director of criminal investigations for the FBI. He likened the wave of real estate loan fraud sweeping the country to the savings and loan crisis of the 1970s and 1980s that left failed companies and bankruptcies in its wake."

"'It's important that we get together for a solution,' Burrus said. 'After the savings and loan crisis, the government imposed a solution on the banking industry, and I don't think we want that to happen here.'"

"Mortgage fraud is on the upswing, with the number of suspicious activity reports to the Federal Bureau of Investigation in 2004 almost triple those in 2003, according to a report the FBI released in May. Burrus said around 15,000 SARs were filed in 2004, and more than 20,000 in 2005."

"According to the Federal Financial Institutions Council, up to 10 percent of all mortgage loan applications in the $3 trillion annual U.S. residential real estate market involve some form of material misrepresentation."

"Some new wrinkles include the rising trend of asset rentals, Burrus said. 'These people will rent you a beach house, a certificate of deposit, things you can say you own for the purpose of getting a loan,' he said. 'Once the loan is obtained, the asset is returned.'"

3 Comments:

At 4:59 PM, Blogger David said...

Dumb question - if fradulent mortgages are repackaged into MBSs, is the purchaser of same left holding the bag, or does it revert to the issuer of the loan?

Thanks

 
At 5:23 PM, Blogger SFV Jim said...

I attended an industry conference a few months back and this topic came up. I was told by someone from the lending side, that it will revert to the issuer of the loan.

 
At 8:24 PM, Blogger David said...

Oh, this ia a beautiful liability for the investor. Thanks, Jim.

 

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