ORLANDO, Fla. - Feb. 5, 2009 - What can Realtors do about mortgage fraud? According to "The Impact of Mortgage Fraud On Florida," a research report compiled by the National Association of Realtors® (NAR), Florida ranks in the top 10 nationally, per capita, for mortgage fraud. But Realtors can play a valuable role in helping stop mortgage fraud. The Florida Association of Realtors® (FAR) commissioned NAR to conduct the research.
The FBI defines mortgage fraud as "schemes containing some type of intentional misstatement, misrepresentation or omission by a loan applicant or other interested parties to fund, purchase or insure a mortgage loan." There are two broad categories:
· Fraud for property or housing. Fraud for property occurs when borrowers seek to own a home that they cannot afford. The borrower then lies to qualify for a mortgage loan, usually by misrepresenting income or employment information, or by falsely claiming that the property will be used as a primary residence.
· Fraud for profit. Industry insiders who seek profit can take a number of illegal steps, such as illegally using revolving equity, falsely inflating the value of a property, issuing mortgage loans based on fictitious properties, using fictitious buyers or through other foreclosure schemes.
Predatory lending is also considered a type of mortgage fraud. Additional schemes could include identity theft to tap into the home equity of unsuspecting homeowners, and builder-bailout schemes employed by builders who seek to avoid bankruptcy.
This Florida fraud report examines the different categories of mortgage fraud and discusses their impact on the real estate market in Florida. It includes the latest fraud schemes, and outlines the measures taken by federal and local authorities, particularly as they relate to Florida markets.
It also offers suggestions to Realtors and consumers on how to recognize, report and avoid mortgage fraud. Red flags, for example, include:
· Significant sales price adjustments that are not supported by comparable market data, possibly accompanied by a request that the list price in the MLS be altered to reflect appraised value.
· Required use of a particular appraiser.
· Downpayment assistance programs that charge excessive fees or that attempt to place restrictions on how their participation is reported in contract documentation, including the HUD 1.
· Large seller contributions, possibly in the form of provisions for large decorator or improvement allowances.
· Mortgage brokers who refer prequalified buyers to agents.
· A questionable statement about the buyer's ability to own and occupy the property. For example, the buyer is retaining their previous property or there is an unrealistic commute to the buyer's employment.
· A buyer who has a very limited credit history and the existing history is with high rate consumer finance companies.