March 13, 2008
JustQuotes: Mortgage Bankers Report On Mortgage Fraud (It’s Up)
“Rising real estate values over the past few years threatened to price new homebuyers out of the market and led some to attempt purchases before they were creditworthy. The higher valuations also led some individual real estate investors to speculate and stretch the truth on applications for multiple properties, especially in active markets, such as Florida and Nevada.
They were aided in this tactic by industry professionals who hoped that any future loan problems would be covered by a profitable sale of the collateral. Credit standards were loosened. More importantly for fraud, documentation requirements were also reduced.
There has been a long history of fraud and sour consequences associated with low/reduced/no documentation loans. As an example, loan servicing staffs are discovering a substantial percentage of prime and non-conforming delinquencies are for loans where the applicants stated their intent to occupy, but were in fact, rental properties at the outset.”
∙ Tenth Periodic Mortgage Fraud Case Report to the MBA (pdf) [mari-inc.com]
First Published: March 13, 2008 3:10 PM
Comments from "Plugged In" Readers
Interesting to compare this with the one on ARMs below. Very similar except apparently for Ohio (high defaults, not in top 10 of fraud) and Minn (low defaults, higher fraud).
Posted by: Rillion at March 13, 2008 4:07 PM
Too many people during the housing boom saw the real estate infomercials and paid $$ to go to one of those seminars to learn the dirty tricks. Now all of us are paying for it. Why doesn't the government try to clean up the real estate infomercials instead of using tax payer money to bail these people out?
Posted by: anon8mizer at March 13, 2008 4:23 PM
What the heck was going on in Georgia in 2003 and 2004?
Posted by: Jack at March 13, 2008 5:51 PM
"Very similar except apparently for Ohio (high defaults, not in top 10 of fraud) and Minn (low defaults, higher fraud)"
There are reasons for why MN is on this list but not the foreclosure list
1) MN is a high income state, with average RE valuations (it never "bubbled" like many other high income states). Thus, many people can afford their home payments, even if they procured it through fraud
2) MN is going after the fraudsters in a big way. (there are a few very large fraud rings). Thus, they're FINDING the fraud. (that's why you see a spike in 2005-6, they caught a huge fraud ring in MN then)
3) most of the fraud is the "owner occupied" fraud. but rentals can ALMOST cover mortgage costs. so the owners aren't foreclosing (*yet).
4) the foreclosures may not have happened YET. (there is only one small part of the metro in major trouble). IT's not like the other states on the list with major areas in trouble (like SoCal, LV, Phoenix, etc)
I expect to see MN foreclosures increase significantly, but for it to stay off the foreclosure list as there are other states that have more structural problems
I am not sure about the fraud list. I think it will likely fall off of that too.
Posted by: ex SF-er at March 14, 2008 4:28 AM