Mortgage fraud up 42% year-over-year?

Posted Aug 26th 2008 6:00AM by Zac Bissonnette
Filed under: Housing

The Wall Street Journal reports (subscription required) that incidents of mortgage fraud rose 42% year over year, based on loans originated in the first quarter that have since been declared fraudulent. The Journal cites data from Mortgage Asset Research Institute.

That number is appalling, and it's hard to know what to make of it. There are two possibilities, as far as I can tell. Either:

The tightening of the credit markets and the newfound conservatism of lenders is a myth, and fraudulent loans are being originated at a more rapid rate than ever before, with crooked consumers and mortgage salesmen thwarting the system even as national headlines warn about the huge problems caused by sloppy lending and mortgage fraud. Or
The 42% jump is more a result of lenders actually doing the research to classify loans as fraudulent. Back when everything was going well, less energy might have been devoted to this.

It seems likely that the answer is some combination of the two. But based on this data, it's hard to conclude that lenders have cleaned up their act and stamped out bad loans. That doesn't bode well for the futures of the industry.

Tags: inthenews, Mortgage fraud, MortgageFraud, mortgages

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Reader Comments (Page 1 of 1)

8-26-2008 @ 7:51AM

al coholic said...

C'mon, Zac....that percentage is virtually meaningless without the numbers. For example, if there were only a small number of these, say 1000, and they increased to 1400, or a 40% increase, would that warrant all your exclaimation points? In this market?

8-26-2008 @ 7:56AM

harbo said...

You have real estate agents that are broke. You have mortgage loan officers that are broke. When people are broke,they get desperate. Desperation leads to fraud. Really pretty simple.

8-26-2008 @ 11:10AM

william lindblad said...

This depends on how one classifies "fraud".
The 100% financing, no down is still out there. Why? It is obvious that this approach is the root of all evil.
Everytime I open this blogging stocks site, it is somewhere on the page.
Zac - go to HUD. Open homes for sale and than open Fannie mae. Near every property has the 100% on it.
This is pure insanity and doing little more than passing more unsubstantiated debt onto the taxpayer and eliminating all common class shareholder equity in the entities. I do notice that Paulson wants to protect the "preferred", as they are the big banking houses. This is little more than a rape of the public and the common class investors. It is "scandal country" on a size and scope that makes Watergate look like a bounced check.
The House and Senate finance committees, the Fed and Paulson of the Treasury are all supposed to protect the interests of the U.S. citizens. So far, they have managed to protect Wall St.
If the above did their job, we would not have these problems.