BluefoxToday blog : Mortgage fraud thrives even in this market

Mortgage fraud thrives even in this market

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. 



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 28 commentsEsko Kiuru • September 01 2008 09:48PM


I am glad that the products that was causing this crisis of Fraud by all these lenders, have dried up or becoming hard to make loans. Yes, it is affecting people from buying homes, but there were people who were buying homes that should have never bought them to begin with. These loan officers were getting so creative and making things up to get people into homes.

Posted by Victor Montalvo Bilingual Realtor Sí, hablo español (Exit Realty Associates) over 10 years ago

Fraud will occur. I just hope the rate of fraud goes down.

There will always be dishonest people in this world.

I hope that keeping up-to-date on scams and suspicious situations will guide us.

All the best.

Happy Labor Day.

Keep on blogging,


Posted by Bill C. Merrell, Ph.D. - Merrell Institue (Merrell Institute ~ Appraisal Education Network) over 10 years ago

It sure is a mess... keep doing your best! Keep up the good blogging!

Posted by Mara Hawks, Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL (First Realty Auburn ) over 10 years ago


I think it never quits. How bad do you need money that you hurt innocent people?


Tom Braatz


Posted by Tom Braatz Waukesha County Real Estate 262-377-1459, Waukesha County Realtor Real Estate agent. SOLD! (Coldwell Banker) over 10 years ago

Hi Esko;

It is very sad that some people are trying to take advantage of people in desperate situation.. Great Post.


Posted by Anthony Stokes-Pereira, Realtor (Better Homes and Gardens Rand Realty) over 10 years ago

Esko, We have ran into situations (as buyers agents) where on a bank owned properties there was some funky business going on ... and a mess now - buyers have to end up looking elsewhere. ~Rita

Posted by Brian Burke, Broker & Advising Expert-Denver Luxury Real Estate (Kenna Real Estate) over 10 years ago

Esko, great information. The more you know, the better you can protect yourself and company.

Posted by Fred Chamberlin, Oak Harbor/Whidbeynulls, #1 Experienced FHA Mortgage Consultant (Guild Mortgage Co - Oak Harbor WA) over 10 years ago


If you've read a few of my other posts recently...I touched on this when there was a few peculiar offers that were presented to me...I won't get to involved but I did suspect they are still trying that crap here....jacking up prices and expecting money back...large amounts that are not within your guidelines...doesn't anyone ever buy with a straight and regular loan these days?...too much creative financing.

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) over 10 years ago

I guess there will always be the bad apples who will figure out how to scam the system.  It this tough market I imagine it is much harder so hopefully those bad apples will go out of business!

Posted by Diane Aurit, Lake Norman Real Estate (LKN Realty, LLC) over 10 years ago

Esko, I have run into a couple of incidents in the last year, but I would never of guest that it was up that high.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 10 years ago

Esko, Thanks for making us aware of these scams.  I know they have always existed but didn't realize it was in that large scale!   I've had Buyers and Sellers try to involve me in some of these things and get really upset when I refuse to be involved.  I always tell them there isn't a commission large enough for me to get involved in fraud and / or risk losing my license.  Every aspect of the contract is to be disclosed.

Also, Thanks for commenting on my Post!

Coeur d'Alene, Idaho - City by the LakePam Jank, Realtor, GRI, CRS, ABR, RRS, PPS
Your North Idaho Real Estate Pro
Web:  Coeur d'Alene Idaho Homes for Sale
Phone:  208-661-2282
Fax:  208-772-628 Toll Free:  800-829-2555 EXT.1275
435 W. Hanley Avenue
Coeur d'Alene, ID  838315

Posted by Pam Jank, Your Coeur d'Alene & North Idaho Real Estate Pro (Coldwell Banker Schneidmiller Realty) over 10 years ago


Some mortgage programs surely were too easy to get.

Posted by Esko Kiuru over 10 years ago


It certainly pays off to keep your eyes open out there.

Posted by Esko Kiuru over 10 years ago


These scam artists keep the Feds busy.

Posted by Esko Kiuru over 10 years ago


There always will be some fraud, no matter what.

Posted by Esko Kiuru over 10 years ago


Taking advantage of those in distress is deplorable.

Posted by Esko Kiuru over 10 years ago

Rita and Brian,

Staying alert in the field today is very important.

Posted by Esko Kiuru over 10 years ago


It's good to be in the know about these developments.

Posted by Esko Kiuru over 10 years ago


This down-market has attracted its share of adventuresome buyers.

Posted by Esko Kiuru over 10 years ago


There always will be a few of them, no question.

Posted by Esko Kiuru over 10 years ago


It's a big increase from last year.

Posted by Esko Kiuru over 10 years ago


I, too, was surprised of the jump in cases.

Posted by Esko Kiuru over 10 years ago

I have never heard of renting an account.  Thanks for the information.

Posted by Laura Moore Godek (Laura Moore Godek, PC) over 10 years ago


There is lots of creativity out there.

Posted by Esko Kiuru over 10 years ago


It's amazing that they would still be in my area...after all these sting would think they wouldn't take the chance but alone this year I've had to suspected ones that sounded fishy...

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) over 10 years ago


Some people just love taking foolish risks.

Posted by Esko Kiuru over 10 years ago

Good reminder. Amazing how a few bad apples give the true professionals a bad name. Great post that reminds us of the importance of awareness. An unfortunate reality in all industries.

Chad Weber -

Posted by Chad Weber (Loan Officer Marketing Lab/ Real Estate Marketing Lab) about 10 years ago


There always will be players whose life challenge is to circumvent the rules.

Posted by Esko Kiuru about 10 years ago