The real estate market is pretty tough right now in countless areas of the country. There are many reasons to it, one of which is the mortgage industry. Due to severe losses recently lenders have tightened their underwriting standards and flat out cut off many home loan programs that got them in trouble to begin with. They are also increasingly dealing with another concern and that is mortgage fraud.
Mortgage Asset Research Institute is the main shop around gathering data on mortgage fraud and then putting together periodic reports on it. Its second quarter release shows that there was a serious 42% hike in cases from the same quarter in 2007. Even though the volume of home loan closings nowadays is way down, the scam numbers are up quite a bit.
Real estate values are very attractive right now and many people would like to buy property on the cheap. Who wouldn't? There is money to be made so long as the buyer gets his hands on a discount-priced house or condominium. But the tough credit market makes it double difficult. So to some the answer is to skirt the rules and get a mortgage at just about any cost.
The Internet has become a good source of information and advice on how to go about it. Numerous sites actually sell ready-made solutions. Phony income and employment verifications are easily available on several websites. A would-be home buyer presently showing nothing on his checking account can rent the necessary bank deposits to place on a mortgage application until the loan closes. A straw buyer uses his impeccable credentials to purchase a home and then transfers title to someone who couldn't qualify for a mortgage. The tricks of the trade are many.
In recent years the Internet has turned into the epicenter of real estate and mortgage information to the consumer, which is great, but as the recent rise in fraud figures indicates, in more ways than one.
Lenders certainly are aware of the trend and will scrutinize applications more carefully than before, delaying approvals and closings. When the real estate market was doing so well a few moons ago it didn't really matter that much if there was some fraud involved because the solid price appreciation would smooth the way. Equity, after all, is an instrument that can solve a lot of problems. But today's game is totally different from yesterday's. Equity often is wiped out and then some. Now, for lenders, it can be a struggle between survival and ruin.