Why mortgage frauds are on the rise

As per the recent report on mortgage frauds conducted by the Federal Bureau of Investigation (FBI), mortgage frauds are up by 176% since the past 5 years.

The FBI has prepared the report taking into account 1200 such fraud cases in which individuals provided the wrong information intentionally in order to get a mortgage. As per the FBI report, frauds cases have gone up by 47% since 2006 along with an increase of 31% in suspicious activities related to mortgage fraud.

However, as the FBI says, the subprime mortgage crisis and the downtrend in housing prices are major factors leading to rise in loan frauds. Here’s what the FBI has found out regarding frauds in recent times:

1. Few years ago when the home prices went up, it led to flexible lending practices and exaggeration of assets by borrowers in order to qualify for mortgage. Both these factors led to the growth of frauds.
2. Some of the states where loan fraud is at its highest are Florida, Georgia, Michigan, California and Illinois.
3. As predicted by the Mortgage Bankers Association (MBA), there seems to be a downward trend in the housing market which is why real estate scammers are expected to look out for dishonest ways to earn profit. Thus, it is likely that they’ll exploit the weakness in the housing market and deceive homeowners.
4. The FBI report confirms the involvement of mortgage brokers, accountants, as well as lenders in a mortgage fraud case. It’s easy for these people to commit frauds because they can manipulate things as they are aware of the mortgage process.

How mortgage frauds affect homeowners

1. If fraud properties deteriorate, homeowners in the neighborhood have a tough time selling their homes. Their property values can even start declining.
2. When the fraud properties sell at inflated prices, homes in the neighborhood become inflated due to which property taxes go up.

Some of common mortgage frauds as per the FBI report are builder-bailout schemes, identity theft associated with Heloc, foreclosure rescue schemes, seller assistance scams and others.