The varieties of mortgage fraud never cease to amaze.
At a session at the Texas Mortgage Bankers Association’s annual conference in Austin, attendees heard that mortgage fraud can now be combined with legal fraud. There’s a potent combo!
According to Chris Long, chairman of Primus Services Group, Coppell, Texas, crooked attorneys can collude with borrowers in a variation on the foreclosure rescue scheme. The attorney sues the lender to stop the foreclosure, pending the result of the suit. The borrower moves out of the home, which is then rented, with the two parties splitting the income, or the borrower getting paid a fee to leave.
At least the borrower in this scheme winds up better off than the victim of the usual foreclosure rescue scam, which is the borrower. Usually the hapless borrower is persuaded to deed over the property to the scammer and then pays rent to them, while the scammer supposedly works on resolving the foreclosure, but in reality does not.
Tony Florence, who heads the consumer complaint division of the Texas Department of Savings and Mortgage Lending, confirmed for the group that loan modification scams and foreclosure rescue scams are the dominant complaints his unit gets.
This confirms that as the energy in the mortgage business has turned from originations to servicing (especially default servicing) so, too, have the fraudsters migrated over. Though origination fraud still goes on. Long told the meeting of a very convincing but bogus “gift letter” attesting to a $40,000 gift towards the mortgage.
Celine Adams, vice president of anti-fraud vendor Interthinx, gave some numbers showing the explosion of mortgage fraud in recent years.
She said the Federal Bureau of Investigation estimates mortgage fraud costs annual losses of $4 billion to $6 billion. The Bureau had 2,794 pending mortgage fraud investigations during fiscal 2009, a 71% increase from 2008 and a 131% increase from 2007.
Some 68% of investigations involved losses of more than $1 million, she said, with total SARs (suspicious activity reports) totaling 67,190 involving $1.5 billion in losses.
The West was responsible for 29% of FBI investigations in 2009, the Southeast 24%, North Central 24%, Northeast 14% and South Central 11%.
But on the positive side, the FBI investigations resulted in 822 indictments or informations, leading to 494 convictions.
