IF YOU NEEDED to stretch your actual income to qualify for a mortgage to buy the house you love, would you consider telling a little white lie, fibbing to your lender?
What if your loan officer thought up some creative ways for you to get into a house you couldn't otherwise qualify to buy, such as cooking up some faked W-2s, credit scores, or submitting false banking and tax documents?
Would you? Whatever your answer, the sobering fact is that thousands of people across the country - ordinary homebuyers and loan industry personnel - no longer are playing the mortgage game straight.
Think of it as the little-publicized, seamy underside of the national housing boom: widespread and growing fraud in home-loan applications, where sticker-shocked buyers lie about their incomes and assets, and where mortgage brokers create what the FBI calls "air loans" - fictitious borrowers, houses, addresses, credit reports, bank statements and income verifications.
It is a multibillion-dollar problem, largely unseen by the vast majority of consumers and loan officers who wouldn't think of taking part. But a new national report confirms the mortgage industry's fears: Fraud appears to be growing faster now than ever.
The FBI received more than double the number of mortgage-related "suspicious activity reports" from 2003 to 2004, and the problem is spreading from the biggest cities out into smaller metropolitan areas such as Scranton, Pa., and Tulsa, Okla.
The top cities for mortgage fraud last year, according to a new report by the Mortgage Asset Research Institute (MARI) were: Atlanta, Dallas, Denver; Orlando, Fla.; Charlotte, N.C.; Memphis, Tenn; Scranton, Columbus, Ohio; Houston, Salt Lake City and Louisville, Ky.
Though most cases of fraud involve multiple misrepresentations, the institute's study found that fibs and falsehoods on applications by individual borrowers constitute the most common problems (56 percent of all cases), followed by bogus or incorrect tax and financial documents (33 percent), fake employment verifications (12 percent) and fabricated or intentionally inflated appraisals (10 percent).
The MARI report, based on pooled industry fraud data as well as FBI statistics, did not attempt to propose ways to cut down on fraud, but instead focused on the types of fraud being perpetrated around the country. Here are some of the patterns investigators found most commonplace:
