Mortgage Fraud

Mortgage fraud is a white-collar crime that has been a steadily growing problem across the country in recent years. It is a crime in which property values can be artificially inflated in order to fraudulently remove funds from the property's equity, although other forms of fraud have been reported. When mortgage fraud occurs, one or more parties knowingly make deliberate misstatements, misrepresentations, or omissions during the mortgage lending process. The perpetration of such a crime usually requires the collaboration of an industry insider.

The scope of mortgage fraud within the United States is staggering. While the financial cost of mortgage fraud is not fully known, one reasonable industry estimate projects the cost to exceed $1 billion. According to the Mortgage Asset Research Institute, there were 70,472 inquires by mortgage professionals regarding potential mortgage fraud occurrences in 2010 alone, as measured through industrywide Suspicious Activity Reports. This represents an increase of nearly 2,300% from only one decade earlier, further underscoring the seriousness of the issue within the housing profession. It is likely that the number of actual mortgage fraud cases could in fact be much higher. This discrepancy could be due to mortgage fraud being hidden in rapidly inflating housing markets, a lack of overall attention from banking regulators and quality control experts, and the fact that Suspicious Activity Reports are not required from all lending institutions.

Although mortgage fraud was not heavily reported before or during the housing boom, the regular and financial media have done much during the latter part of the 2000s to bring the issue to the forefront. The rise in mortgage fraud activity has coincided with a similar rise in the nation's home-ownership rate, which peaked in the mid-2000s at around 70%. It is logical to assume that the robust number of real estate sales that occurred during that time helped to fuel much of the fraud that was later detected.