Preliminary figures from a new report by the Mortgage Asset Research Institute (MARI), show Florida ranking number one for mortgage fraud. California, Michigan, Georgia, and Utah round out the top five states for mortgage fraud. In a report by The Salt Lake Tribune, the announcement came Wednesday after MARI saw an unexpected rise in fraud reports over the past several months. MARI revised their findings from a report released in March based on data compiled during 2006. The unprecedented number of additional fraud reports that came in since preparing the final report, apparently will change the states’ rankings.
According to McNabb Associates, a law firm that practices federal criminal defense on white-collar crime, mortgage fraud does not have its own federal laws that govern the practices. They warn that the Federal Bureau of Investigation (FBI) will still investigate mortgage fraud and assistant U.S. attorneys will bring charges that are tied to another type of fraud that is covered by federal statute, such as wire fraud, bank fraud, or mail fraud. Mortgage fraud prosecutions have increased in recent years, and the FBI has ramped up efforts to investigate mortgage fraud.
The FBI classifies mortgage fraud into two major categories:
Fraud for Profit (FFP) – sometimes referred to as “Industry Insider Fraud” where the motive for fraud is to revolve the equity, falsely inflate the value of a property, or issue loans based on fraudulent applicant qualifications or fictitious properties. It is estimated that almost 80% of all reported mortgage fraud losses fall into the FFP category. The FBI sees a rising trend in equity skimming, property flipping, mortgage-related identity theft, and inflated appraisals. These are some of the fraud schemes criminals are using to take advantage of a $2.37 trillion mortgage market in the United States. To fight this growing problem, The FBI announced a partnership with the Mortgage Bankers Association, which represents an industry hit by fraud costs last year of between $946 million and $4.2 billion.
Fraud for Housing (FFH) – where the mortgage fraud involves illegal actions committed solely by the buyer of a house. The motive here is typically to get a house under false pretenses, using misrepresented financial data, employment data, or other qualifying data. Fraud is defined as a “knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.” Using this legal definition, fraud would normally be considered a tort. However, when the conduct is “willful”, there could be criminal prosecution.
For a complete listing of the activities the FBI uses to constitute mortgage fraud, visit the McNabb Associates web page titled, “When the FBI Comes Calling.” Also reviewed in this web site, are various punishments for those convicted of criminal mortgage fraud.