By Brad Finkelstein
Very interesting piece...
A report from Fannie Mae finds that 23% of all the fraudulent loans originated in 2006-2007 come from the top 10 ZIP codes nationwide.
The report, issued in May 2008, breaks down the information by the first three digits of a ZIP code. The to 10 cities are Detroit, Minneapolis, Tampa, Atlanta, Pompano Beach, Fla., Las Vegas, Miami, Dearborn, Mich., Memphis and Orlando.
This is a change from the list for April 2008, when Minneapolis was listed as No. 1, followed by Atlanta, Detroit, Memphis, Miami and Las Vegas. The last three cities fell off the list for the following month: St. Paul, Victorville, Calif., and Moreno Valley, Calif.
By type of misrepresentation found, income being inflated or fabricated was tops at 26%, followed by the borrower misstating liabilities at 25%.
Whether the borrower actually intended to occupy the property was next at 16%, while a material fact or comparable sale about a property was not accurate was 10%.
Rounding out the findings are a property's value being misstated, 8%; identity or credit history misstatement, 6%; Social Security number discrepancy, 5%; and borrower assets being inflated or fabricated, 4%.
In April, income misrepresentations were 30% of the findings, followed by misstating liabilities at 26%.
Fannie Mae provided the top seven markets for Social Security number misrepresentation. The top three are the Twin Cities of Minneapolis and St. Paul, along with a suburb, Burnsville, Minn. Rounding out the list are Salt Lake City, Atlanta, Fort Walton Beach, Fla., and Houston.
The Southeast edges out the Midwest as the region where the most fraud is found. The states of Kentucky, Tennessee, North Carolina, South Carolina, Georgia, Alabama, Mississippi and Florida had 29% of Fannie Mae's findings.
Meanwhile, Ohio, Michigan, Indiana, Illinois, Wisconsin, Missouri, Iowa, Minnesota, North Dakota, South Dakota and Nebraska was where 27% of the fraudulent loans came from.
California and Hawaii accounted for 15% and the Southwest states of Nevada, Arizona, New Mexico, Utah and Colorado accounted for 10%
At the other end of the spectrum, only 1% of fraudulent loans came from the Pacific Northwest states of Alaska, Washington, Oregon, Idaho, Montana and Wyoming. Next best region was Delaware, Maryland, District of Columbia, West Virginia and Virginia at 4%.
The Northeast - Pennsylvania, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont and Maine - and the oil patch states of Texas, Louisiana, Oklahoma and Arkansas each were found to be host to 7% of the fraudulent loans.
Fannie Mae said that Las Vegas, Tampa and Orlando were found to have loans that contained significant fraud issues related to condominiums. Those areas are believed to be among the hardest hit by the downturn.
In the report Fannie Mae said the specific issues regarding these loans at the project level include ineligible use, such as condotels, lease-back agreements with no access to the units for owner-borrowers, seller contributions that are either ineligible or excessive, inflated appraisals and/or the placement of mandatory arbitration clauses in sales contracts.
At the borrower level for these condominium properties, Fannie Mae commonly found misrepresented income, misrepresentation of the intent to occupy and/or undisclosed liabilities.
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