Mortgage Fraud: Causes and Consequences

Presented by Ed Rybczynski

Fiduciary:

Someone who is legally obligated to place the interests of someone else ahead of his or her own.

Federal prosecutors used the word often.

Accountability:

• You can’t say that you didn’t know.

• You can’t say that you didn’t understand.

• You can’t say that you can’t remember.

“It is a crime to knowingly make false

statements to the United States on this

or any other similar form. Penalties

upon conviction can include a fine and

imprisonment.”

Warning on Hud 1:

Visible arrest at

home or office

Much harsher

sentence

Mid security

facility

Signs:

1. A new source of business appears.

Signs:

1. A new source of business appears.

2. You start to feel uncomfortable.

US Attorney, State of Michigan:

The mortgage lending process

depends on the honesty of brokers,

appraisers, and real estate agencies.

When this process is corrupted by a

team of fraudsters … the result will be

federal prosecution.

Mortgage Fraud:

Failure to disclose

ANYTHING to the

lender!

Best Practices:

• Credibility• Reputation• Fraud prevention• Litigation avoidance

Class Action

The above image was copied from the company’s website. Mortgage Bankers, Ltd. was indicted by a federal grand jury in February, 2007.

Did You

Know

Facts about mortgage fraud and foreclosure rates

Subprime mortgages account

for about 14% of all

first lien mortgages, but …

… accounted for

50% of foreclosures

4th quarter of 2006.

There's a direct correlation

between the fees and pointscharged by a mortgage broker

and …

… the incidence of

misrepresentation

in a loan package.

A mortgage is 5 X more

likely to default in the

first 6 months if …

… it’s application contains

misrepresentations.

The probability of defaultfor a subprime loan is ...

… 6 X that

for a prime loan.

It's estimated that mortgage

fraud losses for 2006

will reach ...

… $4.2 Billion.

In 2006, mortgage fraud

was 10 X more

pervasive than …

… credit card fraud.

Foreclosure rates

climbed 35%

in 2006!

It’s a bitter pill

to swallow!

CaliforniaFlorida Georgia Illinois Indiana Michigan New York Ohio Texas Utah

Mortgage FraudHot Spots 2006

per FBI

Captured

Nov 16, 2006

Matthew Cox

CONSUMERSDo they know enough to commit fraud without coaching from an industry insider?

Survey results:

55 percent of professionalappraisers surveyed reported feeling pressured to inflate property values by real estate agents and loan officers.

October Research (2003)

Survey results:

90 percent of professional

appraisers surveyed reported

feeling pressured to inflate property values to levels to make deals work.

October Research (2006)

In the 2006 study, 75 percent of the appraisers surveyed reported threats of “negative ramifications” for lack of cooperation.