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Loan fraud ‘epidemic’ sweeping the country

Part 1 of 5: Inside real estate's fraud crisis

The once-pleasant Moorings IV neighborhood in suburban Georgia in 1996 became a nightmare of deteriorated, boarded-up vacant homes, their owners' dreams lost to foreclosure as a result of a skyrocketing national problem – real estate fraud. Residential real estate loan fraud is a national epidemic, costing communities nationwide an estimated $1 billion in 2005, compared to $429 million in 2004, according to the Federal Bureau of Investigation. A 2005 white paper from the Federal Financial Institutions Examination Council said up to 10 percent of all mortgage loan applications in the $3 trillion annual U.S. residential real estate market involve some material misrepresentation. And mortgage fraud is likely to increase as the mortgage market shrinks, according to the Prieston Group, which provides mortgage fraud insurance. Mortgage fraud affects individuals whose identities are stolen in the process, and entire neighborhoods are decimated because fraud rings tend to concentrate in sp...