As Production Rose, So Did Appraisal Fraud

Residential originations rose last year and along with them, the industry experienced an uptick in appraisal and valuation fraud, according to LexisNexis Mortgage Asset Research Institute. The most troubling fraud trends include fake tax returns and income and application misrepresentation, the company said in its annual fraud report. Speaking at a press conference during the Mortgage Bankers Association's fraud show, LNMARI noted that Florida is leading the nation in suspected fraud followed by New York and California. In 2009, 33% of all reported frauds involve appraisal misrepresentation, up from 22% in 2008. States experiencing noticeable gains in fraud include Arizona, New Jersey and Virginia. "Loss mitigation distractions have opened the door for opportunistic fraudsters to take advantage of desperation, confusion and complacency," said Denise James, director of real estate solutions for LNMARI. "As lenders try to stave off mounting losses on nonperforming loans, they are trying to modify loans that have been falling into default," said James. "Fraudsters are taking advantage of desperate and confused consumers." Foreclosure rescue and loan modification scams are increasing, and the company is seeing a significant rise in short sale scams.