| US Mortgage Fraud Hits Record High |
|
Financial Times Mortgage fraud hit record highs in 2008 even as the industry made fewer home loans and reined in lending standards, according to figures released yesterday. "Reported mortgage fraud is more prevalent now than in the heyday of the origination boom," said Denise James and Jennifer Butts, co-authors of the Mortgage Asset Research Institute report. Fraud jumped by 26 per cent to a record in 2008 from the previous year, the study showed, based on data collected from roughly 70 per cent of the nation's lenders as well as mortgage insurance companies and mortgage investors. While the increase in reported incidents of fraud is a sign that lenders are being more vigilant, Ms James said that in the context of declining mortgage volume, the figures also showed that fraud is a growing problem. "The unfortunate truth presented by these numbers is that even given fewer loans being processed, mortgage fraud is on the rise," she said. "Fewer loan originations coupled with increased fraud incidence equals new times of desperation." The US Treasury's Financial Crimes Enforcement Network estimates that mortgage fraud will result in losses between $15bn (£10.6bn) and $25bn in 2008. The Federal Bureau of Investigation has more than 1,500 open cases. At the height of the mortgage boom, lending standards became loose and opportunistic fraud for profit was easy to perpetrate, said Ms James. However, the deepening housing slump has made it harder for prospective borrowers to obtain financing, making fraud for housing increasingly prevalent. The most common type of fraud continues to be application misrepresentation, which includes falsifying a borrower's income. Such fraud represented about 61 per cent of all the reported cases last year. Copyright The Financial Times Limited 2009 |