Skip to main content

2008 FBI Mortgage Fraud Report Reminds Buyers (and Sellers) Why it is So Darn Hard to Get that Loan Approval

It is getting harder and harder to satisfy mortgage loan underwriters these days. Ask anyone who makes a living helping Chicago area home Buyers or Sellers close their real estate contracts.

  • Tight mortgage lending guidelines are requiring Buyers to document every last nickel of income and savings, the sources of those funds.
  • New appraisal rules are insulating property appraisers from real estate agents and loan officers.
  • Lenders are requiring specific (and increasingly careful) examination of chains of the transfer of title ownership.
There is a lot more paperwork being required. Its taking Longer. Frankly, it is a pain in the kishkes trying to manage the process and keep deals together as a loan application winds its way through the lending pipeline.

I hear a lot of grousing from Buyers, Sellers & Real Estate Agents. (OK, I grouse about it too)

But then, Tuesday's FBI report on Mortgage Fraud reminds us all why we are working so much harder. Our present day (would be) borrowers are bearing the consequences of the sins of our predecessors.

Some key findings & conclusions:

  • The downturn in the economy, spike in foreclosures and defaults, & diminishing credit availability are fueling rampant mortgage fraud fraught with opportunistic participants desperate to maintain or increase their current standard of living
  • In 2008, suspicious activity reports increased 36 percent to 63,713 after 46,717 filings were reported in 2007.
  • at least 63% of all pending FBI mortgage fraud investigations during 2008 involved losses totaling more than $1 million.
  • In 2008 FBI mortgage fraud investigations totaled 1,644, a 37 percent increase from 2007 and a 100% increase from 2006.
  • Popular schemes include builder bail-out, short sale, foreclosure rescue, credit enhancement, loan modification, illegal property flipping, seller assistance, bust-out, debt elimination, mortgage backed securities, real estate investment, multiple loan, assignment fee, air loan, asset rental, backwards application, reverse mortgage fraud, and equity skimming.
As lenders tighten the screws on lending guidelines and procedures to stem the tide of frauds, I imagine that future reports will show a decline in the number of overall suspicious activity cases. Scammers will move on to other, more lucrative schemes.

None of this makes it any easier for our clients, or our workloads. But at least it helps remind us why things are the way they are right now.

Comments

Popular posts from this blog

The Equifax data breach and you — 6 steps to take now

Identity thieves hit a major credit reporting agency—hard. Millions of consumers’ confidential identity information has been compromised.

Equifax, one of the big three credit reporting agencies announced that a massive security breach took place earlier this year. Offenders accessed data sets of 143 million US consumers.

With federal tax reform looming, should I prepay 2017 Cook County property taxes?

By Michael H. Wasserman

Paying property tax bills before the end of the 2017 may help some owners save on their federal income tax liabilities.

The Tax Cuts and Jobs Act has been called the most sweeping tax reform bill in decades. Like it or
not, tax reform is coming. Others might wring their hands with glee or with worry. We are already working on ways to minimize the pain this reform might cause. 
One aspect of the pending tax reform plan presents a clear challenge for most Chicagoland home owners, the elimination of deductions for State and Local Taxes (SALT). The house and senate plans both limit deductibility to $10,000. Once the tax reform is signed into law, we will pay federal income taxes on the money we use to pay our local taxes exceeding that $10,000 threshold. Some homeowners who have the foresight (and lets face it, the savings) to act swiftly may want to pre-pay their first installment 2017 property tax bills this year before the tax laws kick in, so that those payments …

What to do when drones fly near your home

Imagine a quiet evening on the deck of your new home when—out of nowhere—a noisy drone begins hovering around your property, almost certainly snapping photos or video. It’s like Space Invaders meets Gladys Kravitz. So what do you do?