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from Local Attorney, Michael H. Wasserman

Saturday, October 31, 2009

Mortgage Fraud still a Growth Industry?

New Report Predicts How, & Where its Happening

We may be done with the recession, but there is still a lot of pain left for the mortgage industry and for property values in distressed areas. A new report predicts increases in mortgage fraud ahead for states with high foreclosure rates.
When fraud risks rise, increased foreclosure activites follow.

Nevada has the highest mortgage fraud risk, California Arizona and Florida. Chicago notwithstanding, Illinois risks trail the national average.

An abundance of distressed borrowers, oversupply of foreclosed properties, and relaxed lender valuation guidelines (??) all seem to be fueling new schemes.


Most involve property valuation fraud. A trend towards undervaluing REO and short-sale properties is noted, but m
ost often values are falsely overstated so that borrowers can extract more equity from properties. Increased reports of inflated appraisals continue "with a vengeance", (the National risk index is up 25% in the last quarter alone, a trend that started in Q4 2006.

No surprise to me that appraisers are missing the mark high or low. I have seen plenty of deals that have been impacted by "problem" appraisals, but I am a bit impressed that scammers have figured out how to get "the right" valuations on distressed properties - for sales and re-fis, what with the whole HVCC thing and all.

The 2009 3rd Quarter Mortgage Fraud Risk Report was released by Interthinx, a mortgage industry "risk mitigation" firm that apparently screens loan applications for client mortgage lenders.



BONUS: You gotta love the introductory video on this firm's web site. Simply wonderful.