WHEN A homebuyer has a high FICO credit score, in the upper 700s, is self-employed with an annual income of more than $100,000, owns a few rental properties, is purchasing a house priced considerably higher than the area average and is buying it alone, what comes to mind?
Solid citizen? A good addition to the neighborhood? An excellent bet to get a big mortgage with a great rate? Sure.
But would you believe fraud? Would you believe that statistically the buyer with that profile is more likely than other loan applicants to be involved in some form of mortgage rip-off skullduggery when the lender he is applying to specializes in loans for homebuyers with imperfect credit?
Welcome to the booming - and sometimes bizarre - world of mortgage fraud. With larceny in their hearts and sophisticated electronic document-preparation programs in their laptops, unethical mortgage loan officers, brokers, real estate agents and lawyers can create fake FICO scores, fake tax returns, fake identities and order up inflated appraisals. And, according to witnesses at an Oct. 7 congressional hearing, mortgage fraud is one of the hottest con games going.
An FBI assistant director testified that fraud is "pervasive" in the mortgage market and growing fast. Rep. Bob Ney, an Ohio Republican who is chairman of a House financial services subcommittee, noted industry studies suggesting that "between 10 and 15 percent of all home loan applications involve some fraud or misrepresentation."
The potential costs to buyers and mortgage lenders could be in the billions of dollars a year.
Some of the fraud might seem minor - a little fibbing on the application about a borrower's income or a lack of candor about where the buyer's down payment cash came from.
But other fraud is far more organized. In Charlotte, N.C., last month, the FBI cracked a ring of 35 "mortgage industry insiders" who had combined to obtain 380 fraudulent home loans exceeding $70 million, said Chris Swecker, assistant FBI director for criminal investigations.
In Phoenix, 48 of 64 home loans originated by one loan officer involved "pervasive document fabrications," said Kenneth M. Donohue Sr., inspector general in the Department of Housing and Urban Development.
