Mortgage Fraud Study Suggests Investigators Will Focus on Collusion
The types of Arizona mortgage fraudcases prosecuted by state and federal investigators often shift with changes in the housing market. As new schemes become more prevalent, resources are reallocated to detect and prosecute them. Mortgage industry professionals should be mindful of what is on the radar of investigators.
Mortgage fraud rates by industry professionals were down 35 percent in 2011, according to a new report by LexisNexis Risk Solutions. The report examines the current state of subscriber-verified residential mortgage fraud and misrepresentation in the U.S. committed by industry professionals, based on data submitted by LexisNexis Mortgage Industry Data Exchange (MIDEX) subscribers. However, this decline was likely influenced by housing conditions—mortgage loan origination hit its lowest level since 2001. The two types of fraud involved in the greatest number of investigations in 2011 were loan application misrepresentations and appraisal fraud.
Most notably, the LexisNexis report detected significant increases in potential collusion fraud involving multiple professionals. “Collusion" refers to incidents of undisclosed non-“arm’s length" transactions. Based on data collected for the report, seven percent of loans originated in 2009 included evidence of collusion. That percentage jumped to 9.7 percent for 2010.
“Increased levels of fraud and misrepresentation in the foreclosure, short sale, and real estate-owned worlds have pushed the issue of collusion to the forefront," said Tom Brown of LexisNexis.
The Federal Bureau of Investigation has already started to shift its attention to collusion. According to the FBI’s Financial Crimes Report to the Public for FY 2010-2011,“Current investigations and widespread reporting indicate a high percentage of mortgage fraud involves collusion by industry insiders, such as bank officers, appraisers, mortgage brokers, attorneys, loan originators and other professionals engaged in the industry."
Due to the increased focus on collusion, anyone who participated in questionable or improper loans could quickly find themselves investigated by local and federal authorities. In these cases, it is imperative to consult an experienced Arizona mortgage fraud defense attorney as soon as possible.