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New Study Reveals that Florida Leads the Country in Mortgage Fraud Risk

Six years after the 2008 mortgage crisis the U.S. is still dealing with the aftermath of rampant mortgage fraud practices. As those who should never have been approved for mortgage loans in the first place have inevitably defaulted on their loans, the fraud that was committed to get their loans approved in the first place has been revealed. However, as mortgage fraud practices have become common knowledge, people are still continuing to engage in illegal mortgage activities. While many view the persistence of mortgage fraud as a slap in the face to federal institutional banking reforms, others believe that the trend is being caused by heightened levels of mortgage fraud reporting, which has prevented mortgage loan fraud that would have previously gone unnoticed.

Rising Mortgage Fraud in Florida

Florida, a state heavily hit by the housing market collapse, is now seeing a rise in the amount of mortgage fraud cases. In fact, according to a report released by CoreLogic, it has been revealed than in the second quarter of 2014, around 11,100 mortgage application that were filed containing serious misrepresentations and/or fraudulent information and documentation. This fraud represents a decrease in overall mortgage fraud from last year’s second quarter. However, the report also noted that Florida is home to the country’s highest year-over-year growth in mortgage application fraud. The top five list also included New Jersey, Mississippi, Rhode Island and Connecticut. The five U.S. metropolitan areas that had the highest year-over-year fraud risk growth include Florida’s Miami-Fort Lauderdale-West Palm Beach, Connecticut’s Bridgeport-Norwalk-Stamford, Florida’s Sarasota-North Port-Bradenton, Florida’s Tampa-Clearwater-St.Petersburg, and New York’s Jersey City-New York.

The CoreLogic fraud risk index analyzes six components of the mortgage application. These components request information about an applicant’s identity, employment, undisclosed debt, property ownership, income and occupancy. In the second quarter of 2014, property fraud risk had the biggest gain while undisclosed debt decreased by over 20 percent.

Property fraud occurs when a borrower makes intentional misrepresentations about their property’s market value. The fraud risks that decreased included occupancy fraud, which occurs when a borrower intentionally misrepresents their reason for occupying the property underlying the mortgage loan. Other fraud risk declines include employment fraud risk from employment information misrepresentations, false income reporting, and also identity fraud risk, which happens when applicants submit false identity documents or otherwise misrepresent their true identity. Undisclosed debt risk decreased the most in 2014. It is assumed that this decrease was caused by the more stringent due diligence requirements placed on lenders to ensure compliance with the ability-to-repay rule.

The current market factors that influence an applicant’s decision to commit mortgage application fraud include:

  • Lenders facing moderate but tight credit policies;
  • Increasing interest rates that have prevented even the most qualified borrowers from entering the housing market;
  • Rising property values enabling homeowners with previously low equity to re-enter the housing market; and
  • Aging negative credit reports along with increased job creation following the beginning of the recession, which has created more borrowers who are technically qualified to receive borrowed funds.

Are You Facing Criminal Charges?

Contact criminal law attorney Jeffrey S. Weiner, P.A. in South Florida today if you need legal representation in a mortgage fraud suit or any other criminal law matters. We are prepared to aggressively advocate on your behalf in order to protect your rights.

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