Frank A. Rubino, ESQ.

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Mortgage fraud arrests still rising

The Federal Bureau of Investigation recently acknowledged that one of its most targeted activities is still on the rise. According to the FBI's year-in-review report on mortgage fraud, the instances of fraudulent behavior have increased despite fewer home sales. The depressed housing market and continued failings in bank underwriting policies have contributed to this increase. Last year, there were 23% more foreclosures than in 2008. It is unclear what percentage of this increase can be attributed to mortgage fraud.

The FBI acknowledges that mortgage fraud and other forms of real estate fraud still pose a relatively low risk of discovery. Investigators have stepped up their efforts over the past year, but it is difficult to know what impact that has had. There is little evidence that the number of people being arrested for mortgage fraud has made any difference to the sagging real estate market.

In addition to the fraudulent activities that led up to the downturn in the housing market, a number of practices have increased to take advantage of the depressed market. Fraud claims have increased with regard to short sales, loan modifications and other strategies used by home buyers to avoid foreclosure. As law firms and other businesses attempt to quickly capitalize on this new market, accusations of fraud may become commonplace.

The FBI has primarily targeted industry professionals, including mortgage brokers, real estate agents, developers, lenders and real estate attorneys. Federal arrests for mortgage fraud increased by nearly 12% in 2010, largely based on cases coming from California and Florida. For now, the real estate industry should continue to watch for further federal investigations and criminal prosecutions involving mortgage fraud.

Source: Fox Business, "An Industry That Won't Quit: Mortgage Fraud," Al Lewis, 19 August 2011

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Frank A. Rubino, Esq.
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