Reports of mortgage fraud reached record highs in Maryland and the United States last year as more loan originators and borrowers resorted to falsifying documents and the home lending industry worked harder to detect problems, a study released yesterday showed.
Maryland jumped to fifth place in reported incidents of fraud, after ranking 15th in 2007, the Mortgage Asset Research Institute said in its 11th annual fraud case report, based on data submitted by mortgage lenders, bankers, insurers and others. The number of cases nationally rose 26 percent, researchers said.
More than half of the reported incidents in Maryland had to do with loan applications, which could include falsifying or misrepresenting information about income, employment, assets, debt or credit history, the research showed. The state had the highest percentage of tax return and financial statement fraud incidents in the nation, according to the report, which tracks cases in which a mortgage professional - lender, appraiser, title attorney or others - played a role.
Increased reports of fraud are another sign of the housing and real estate meltdown that in part led the nation into recession. As home values skyrocketed at the height of the housing boom, mortgage loans with loose lending standards were readily available to meet growing demand from consumers and investors. The recent credit crunch has forced lenders to tighten standards, making it more difficult to get a loan.
"With fewer loan originations today, the data suggests that the economic downturn may have created more desperation, causing more people than ever before to try to commit mortgage fraud," said Denise James, director of Residential Mortgage Solutions for LexisNexis Risk & Information Analytics Group, which owns the group that did the study.
Rhode Island ranked first in the country for incidents of mortgage fraud, followed by Florida, Illinois and Georgia, according to the group's index. Last year marked the first time Maryland has appeared among the top 10 states for mortgage fraud.
"It's understandable the fraud would be exposed in periods of declining real estate prices," Maryland U.S. Attorney Rod J. Rosenstein said yesterday. "People got away with this when prices were rising."
Rosenstein said the increases are consistent with what his office is seeing. The U.S. attorney has several investigations under way that involve a "substantial number of properties" and "hundreds of millions in mortgage loans that were initiated as a result of fraud," perpetrated either in applications or in settlement documents, he said.
