Fraud & Investigations

Crimes that Contributed to Historic Default Levels May be Creeping Back

Posted on Wednesday, October 27, 2010


By: Carrie Bay
DSNews.com
Trends are emerging that indicate “fraud for property,” i.e. fraud to attain homeownership, which was once considered to be less dangerous than “fraud for profit,” is returning to the industry. The analysts at Interthinx reached this conclusion after witnessing steep increases in two of the four types of mortgage fraud the company tracks.
According to the California-based firm’s quarterly report released Monday, its risk indices for employment/income fraud and identity fraud in mortgage applications have both jumped more than 20 percent over the last year – an indicator that incidences of “fraud for property” is on the rise.
Interthinx explained that a closer examination of “fraud for property” cases shows that there is usually a network of professional enablers involved in these transactions who encourage borrowers to lie about their qualifications or who lie on their behalf.
These insiders make a commission each time that a misrepresented loan closes. Seen from that perspective, Interthinx says it is clear that these crimes are committed not only “for property” when it comes to the borrower, but also “for profit” to line the pockets of the professionals involved.
Interthinx says “fraud for property” was what sparked the mortgage meltdown as unqualified borrowers began to default in large numbers. This recognition means “fraud for property” must be identified and addressed going forward with the same urgency as “fraud for profit,” according to the risk management firm.
“In the past, lenders viewed fraud for property as a more benign type of crime than fraud for profit, but when those loans defaulted, everyone learned how dangerous this type of fraud truly is,” said Kevin Coop, president of Interthinx. “The crimes almost always include an inside party who is reaping a profit on the fraud. The industry must remain alert to shut down these schemes before loans are funded. That will go a long way toward helping our industry, and our country, recover.”
According to Interthinx’s latest Mortgage Fraud Risk Report, Nevada remains the state with the highest risk for mortgage fraud. Its largest population center, Las Vegas, takes over as the most risky metropolitan statistical area in the nation.
Arizona is the second riskiest state for mortgage fraud schemes


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