Lenders still plagued by fraud
Real estate brief
By Inman News, Tuesday, August 26, 2008.Mortgage fraud continues to be an issue in newly originated loans, according to a report from the Mortgage Asset Research Institute that shows a 42 percent increase in reported incidents of fraud in loans originated during the first quarter compared to a year ago.
MARI identified Florida, California, Illinois, Maryland and Michigan as the states with the biggest mortgage fraud problems, with reports of suspected misrepresentation concentrated in urban areas. Florida accounted for about one in four loans with material misrepresentations nationwide, and the Miami metropolitan statistical area (MSA) accounted for about half of all reports submitted for properties in the state.
In California, 52 percent of the properties with misrepresentation are in the Los Angeles MSA. In Illinois, 94 percent of investigations are for properties in the Chicago MSA. In Maryland, 25 percent of reports are in the Baltimore MSA. The Detroit MSA encompasses 56 percent of all of the misrepresentation reported for Michigan.
MARI aggregates reported incidents of fraud and verified misrepresentations submitted by lenders who originate more than 80 percent of U.S. wholesale mortgages to its Mortgage Industry Data Exchange (MIDEX) database.
The most commonly identified type of suspected fraud was “general application misrepresentation,” followed by misrepresentations related to income and employment. MARI said multiple problems, such as identity theft and identity fraud, continue to be common problems in loan transactions in which fraud is suspected.
"As lenders pursue higher-quality loans for the market, the priority should be on identifying poor quality at the earliest possible point in the process -- and at the lowest possible cost," MARI's Quarterly Fraud Report concluded. "In MARI’s view, the origination and prefunding processes offer the largest and least expensive opportunities to assure funding of higher-quality loans. How a lender accepts or rejects a loan application at the front door is often all a criminal needs to see how much further he or she may push through the loan process."
MARI is a ChoicePoint company, which touts MIDEX and MARI Loan Fraud Alert Service Pro (LFAS Pro) as tools for lenders to identify potential application risk, patterns of fraud and hidden relationships among parties involved in mortgage transactions.
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Submitted by Wenceslao Fernandez Jr, BS, Realtor, CDPE on August 27, 2008 - 1:24pm.
This industry is prime for 4-eye (or 10-eye) principle of review.
Yes, there are people who will try to get away with anything that others will let them.
Buyers will try to buy, loan professionals will try to process and close a loan, and lenders want the status of being the largest lender or whatever accolades they seek for themselves and their stockholders.
In the end, the internal process of a financial institution (which is soooo controlled and regulated), should be able to catch inconsistencies in an application.
The final buck should stop at the underwriter's desk or committee. After all, the board of directors, the CEO, CFO, etc all come up with a decision to improve sales and their bottom line, prompting Presidents and VP's and other executives to brainstrom and put together new products to package and promote, that will in turn cause new loans to be made.
The chain continues down the line when the VP's of Sales ask their supervisors to lash their sales and marketing forces to promote their new products with terms like SIVA, SISA, NINA, NIVA and whatever else they can come up with to make sure loan applications begin to come in by the thousands.
Touting buyers and homeowners with money loan carrots, only promotes exactly what they want. Mass applications. Among them, there are without a doubt some that should never get past the entire process, but they do.
I only hope there are also people out there looking with common sense glasses through all the applications, making sure only the good ones get approved and funded.
But...we live in an imperfect world. Lenders wanted more business, and they got it! Now we all have to live with the consequences.
Perhaps if loans had not been so easy to obtain, everyone would have in turn been a bit more measured. But in the panic, overexhuberance took hold, and voila!
Builders got approved - and they built
Buyers got approved - and they bought
Homeowners got approved - and they cashed out in a refi
Now...
Lenders don't want to lend (or can't) - so they don't
Builders can't borrow - so they stopped
Buyers can't borrow - so they don't
Homeowners can't borrow - so they don't
Now, all we need to do, is find a happy medium to resume measured lending, which will cause measured borrowing for measured purchases. At least until market confidence is restored, and beyond.
www.MiamiRealEstateKing.com
Certified Distressed Property Expert
Miami-Dade County, Florida.
Submitted by Michael LittleBig on August 27, 2008 - 7:00pm.
In your article "Lenders still plagued by fraud"
Fraud is defined as deception for unlawful gain,
What type of fraud was committed?
I am not sure who it is that committed the fraud in your article?
The basis of this housing meltdown is based on the fact that a mortgage loan was made between a borrower and who else? Was it a broker? A mortgage company? A bank, if so what kind of bank, commercial, investment, thrift, federal, state? What kind of lender?
The point is who had the knowledge to perpetrate the fraud? Was it the borrower? Was it the borrower in collusion with the lender? Was it the lender? The Broker?
For what purpose was the fraud committed? Was it to sell a mortgage to the secondary markets for monetary gain?
Would the borrower or the lender have the most to gain through fraud in closing a mortgage?
If the lender did not require any documentation from the borrower, is that fraud or is that just
poor lending ethics?
My point is that this article like many articles uses the term fraud. That in itself has not defined what happened. With all due respect,the article is at best without the definition of the type of fraud and the type of lender which is misleading.
Another example is that people say, “ don’t bail out the homeowner”. I have yet to see where any homeowner has been bailed out by anyone.
Certainly the 4 million plus foreclosed or in foreclosure home owners who have no legal voice to combat their foreclosure. So I would not think that they committed fraud or got bailed out.
But I do read that many of these borrowers are blamed for the foreclosure crisis. Articles say that these foreclosure borrowers lived high on the hog, took big vacations, bought SUV’s. Are these facts or loose worded comments?
I would hope that people who write about this housing meltdown start giving definition
to the terms that they use like fraud, bailout, and so forth. This is how the facts get distorted and the rumors become the truth.
Frankly this article raises more questions than it gives answers.
Just remember that there are at least 4 million people who have been or are in foreclosure.
Few of them can financially afford to fight their foreclosure. There are probably none of them
who have redress or the right to contest or object to their foreclosure within the “system” designed by federal or state law. They have no voice. I can’t speak for them. I am one of them.
Michael LittleBig
POB 16588
Rocky River OH 44116-0588
Submitted by Gamil Sawiris on August 30, 2008 - 10:16pm.
I think it is so prevalent because mortgage fraud is a relatively low-risk, high-yield criminal activity which is accessible to many. However, according a Financial Crimes Enforcement Network (FinCEN) report, finance-related occupations, including accountants, mortgage brokers, and lenders were the most common suspect occupations associated with reported mortgage fraud.