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Field Guide to Mortgage Fraud

(Updated Oct. 2013)

Mortgage fraud is one of the most notorious crimes in the United States. It has left many home owners with "underwater" mortgages that are substantially higher than the valued price of their home, many lenders with defaulted loans and foreclosed homes, and many real estate professionals in the precarious position of needing to rigorously screen new clients' financial portfolios while keeping apprised of major regulatory changes and new procedures. Learn about the different types of mortgage fraud and discover how to recognize the signs, take precautions, and report incidents. (K. Stockert, Information & Web Content Specialist)


Recognizing the Signs

Mortgage fraud may include, but is not limited to:

  • Property flipping
  • False and inaccurate appraisals
  • Equity skimming
  • Application fraud
  • Credit or income misrepresentation
  • Asset and down payment misrepresentation

Source: Mortgage Fraud: Recognizing the Signs, (National Association of REALTORS®, 2006).


Mortgage Fraud Defined

Mortgage fraud comes in many different forms and can derive from any of the parties involved in the mortgage acquisition process—buyers, sellers, investors, property developers, appraisers, real estate agents, creditors, lenders, etc.—so it is important that all parties involved in the mortgage process recognize key signs of fraud and stay informed of the procedures for prevention. The articles below offer a starting point for understanding mortgage fraud.

Source: Mortgage Fraud Report 2010, (U.S. Federal Bureau of Investigation).


Risk Management Resources

Mortgage Fraud: Current Trends and Issues, (Real Estate Issues, Winter 2012). Q

The Latest Short Sale Schemes, (National Association of REALTORS®, Mar. 2011).

5 Real Estate Scams You Need to Know About, (REALTOR® Magazine, Aug. 2010).

Short Sales Ethics: 6 Temptations to Avoid, (REALTOR® Magazine, Apr. 2010).

Quiz: Mortgage Fraud, (National Association of REALTORS®).


Impact of Mortgage Fraud

Market Rebound Attracts Greater Mortgage Fraud Risk, (ABA Banking Journal, Sept. 2013).

Mortgage Fraud Wanes, but Looser Lending Raises Risks, (CBS, Sept. 2013).

CoreLogic Releases Mortgage Fraud Report, (Wireless News, Oct. 2013). Q

CoreLogic; CoreLogic Reports Fraud Risk Among Mortgage Applications Declined 5.6 Percent In Second Quarter Of 2013, (Real Estate Business Journal, Oct. 2013). Q

Mortgage Fraud Down, but New Schemes Arise, (REALTOR® Magazine, Sept. 2013).

Mortgage Fraud Shows First Notable Signs of Falling, (REALTOR® Magazine, Aug. 2013).

Government Crusade Against Mortgage Lenders, (Washington Post, Oct. 25, 2012).


Mortgage Fraud Prevention

What You Need to Know About Mortgage Fraud, (CNBC.com, Oct. 2013).

Bank of America Sued for Alleged Mortgage Fraud, (CNN Money, Oct. 24, 2012).

California, Nevada team up to investigate mortgage fraud, (Washington Post, Dec. 2011).

Avoiding Mortgage Fraud is Everyone’s Business, (The Canadian Property Valuation, 2012). Q

Lenders Try to Catch Borrowers’ ‘White Lies’, (REALTOR® Magazine, June 1, 2012).

Keep Your Clients Safe from Mortgage Relief Scams, (REALTOR® Magazine, Apr. 23, 2012).

Why Mortgage Fraud Still Exists, (Mortgage Banking, Aug. 2010). Q

Preventing Fraud at Closing, (Mortgage Banking, Nov. 2009). Q


Reporting Mortgage Fraud in the United States

The Federal Trade Commission (FTC)*
600 Pennsylvania Avenue, NW
Washington, D.C. 20580

*Note: The FTC does not resolve individual consumer problems. The FTC does investigate mortgage fraud with the goal of bringing it to the justice department for legal action; your input will aid the FTC in this process.

U.S. Federal Bureau of Investigation (FBI)
935 Pennsylvania Avenue, NW
Washington, D.C. 20535
Phone: 202-324-3000

  • For the FBI's latest updates and details on Mortgage Fraud issues, click here
  • Locate an FBI office in your area to report fraud or call the toll-free number 1-800-CALL-FBI (1-800-225-5324).  You can also fill out an online FBI Tips and Public Leads Form.

Useful Websites

Financial Fraud Enforcement Task Force—Established in November of 2009 by President Obama, the Financial Fraud Enforcement Task Force is designed with the intent to hold accountable "those who helped bring about the last financial crisis, and to prevent another crisis from happening."

PreventLoanScams.org—The Lawyers' Committee for Civil Rights Under the Law is a U.S.-based nonprofit organization formed in 1963. "The principle mission of the Lawyers' Committee is to secure, through the rule of law, equal justice under law. As a leader of the Loan Modification Scam Prevention Network (Network), the Lawyers' Committee administers the www.preventloanscams.org website, and leads the enforcement and data collection efforts for the Network."

  • If you think you've been scammed or approached by a company or individual promising to help you with your foreclosure, report it today or call 1-888-995-HOPE.

The Office for Victims of Crime (OVC) is a federal office within the U.S. Department of Justice that "provides federal funds to support victim assistance and compensation programs around the country and advocates for the fair treatment of crime victims."

  • To access a searchable online directory of crime victims' services, click here.

Better Business Bureau is NOT affiliated with the U.S. government. It is operated by the Council of Better Business Bureaus Inc. and allows businesses and organizations to join as members. The mission of the Better Business Bureau is "to successfully resolve complaints involving buyers and sellers in a fair and timely fashion."


Research On Your Own

To search for the most recent articles on on this topic, go to ProQuest from the Library's home page and enter subject terms such as:

LexisNexis® Mortgage Asset Research Institute: Twelfth Periodic Mortgage Fraud Case Report (Free; registration required).

The Mortgage Bankers Association® releases monthly and quarterly economic outlook reports and forecasts on the mortgage banking industry. To review these reports, click here.

Mortgage Fraud Blog is an opinion-based website edited by Rachel Dollar, "an author and a nationally recognized speaker on the topic of mortgage fraud" with a background as a Certified Mortgage Banker and attorney.


eBooks & Other Resources

eBooks.realtor.org

The following eBooks and digital audiobooks are available to NAR members:

Busted: Life Inside the Great Mortgage Meltdown, (Overdrive Audiobook)

Confessions of a Subprime Lender, (Adobe eBook and Kindle)

Decoding the New Mortgage Market: Insider Secrets for Getting the Best Loan Without Getting Ripped Off, (Adobe eReader)

Fraud Prevention for Commercial Real Estate Valuation, (Adobe eBook and Kindle)

Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, (Kindle, Adobe eReader)

The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices and Pitfalls, (Adobe eReader)

The New Rules for Mortgages, (Kindle, Adobe eReader)

Saving Your American Dream: How to Secure a Safe Mortgage Protect Your Home and Improve Your Financial Future, (Adobe eReader)

Books, Videos, Research Reports & More

The resources below are available for loan through Information Central. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Information Central at 800-874-6500 for assistance.

An American epidemic: mortgage fraud- a serious business

Brokers and Agents: How You Can Identify and Avoid Mortgage Fraud (2009)

Financial Shock: A 360 degree look at the subprime mortgage implosion, and how to avoid the next financial crisis, (Upper Saddle River, NJ: FT Press, 2009).

InfoCentral Blog


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The inclusion of links on this field guide does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this field guide complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.