Mortgage fraud up sharply

Wrong. A benchmark quarterly study released Monday by the mortgage industry's principal compiler of fraud reports, the Mortgage Asset Research Institute, or MARI, found that the number of cases jumped by 42% between the second quarter of 2007 and the same period this year.

They included hoked-up income verifications and credit reports, falsified employment records, financial assets illegally "rented" to buyers to beef up their loan applications, inflated appraisals, straw-buyer scams and a wide variety of hanky-panky schemes among sellers and purchasers designed to fool lenders.

The highest numbers of fraud reports in the second quarter came from Florida, California, Maryland, Illinois and Michigan.

Tough market conditions appear to increase pressures to commit fraud, said institute Vice President Merle D. Sharick.

"Mortgage fraud used to be a crime of opportunity," he said. "Now it's a crime of necessity for people who are desperate to maintain lifestyles they became accustomed to" during the housing boom years.

The Internet is a key facilitator of their activities, Sharick said, with "dozens of sites" hawking fake income and employment verifications, tax filings, credit scores, deposit verifications and other forms of deception.

Some individuals have begun using free community advertising services including Craigslist to promote their wares, such as bank deposits that are available to home loan applicants to claim as their own on mortgage applications. The deposits remain in the total control of the scammers; only the account identification is changed for a short time.

One Web promoter recently blitzed loan officers with e-mails touting "pay stub and job verifications -- show the income you need on paper." Recipients were directed to submit requests by text message. A website address also was listed but was not functional when checked late this month.

A scam that recently popped up online involved promoters trolling the Web for "straw buyers" -- people with good credit scores and incomes who'd rent their names and asset verifications for home purchases by unqualified buyers. In one case, Sharick said, straw buyers were offered $7,500 per transaction for their financial identities. Legal title subsequently was transferred from the straw buyer to the actual purchasers, who otherwise would have been rejected by the lender. The straw buyers later could claim identity theft.