The likelihood that fraud or misrepresentation is involved in a mortgage in Georgia is higher than 44 other states. Georgia ranked sixth in the Investigation Mortgage Fraud Index issued by Alpharetta-based LexisNexis Risk Solutions on July 13.
Distressed homeowner fraud is becoming more likely to be the source of the misrepresentation these days, displacing loan originating fraud, according to an FBI report.
The 2011 Investigation MFI dropped to 145 from 185 in 2010, according to the company's 14th annual Mortgage Fraud report. The report examines the current state of subscriber-verified residential mortgage fraud and misrepresentation in the U.S. committed by industry professionals who subscribe to the LexisNexis Mortgage Industry Data Exchange (MIDEX).
Georgia has been in the top 10 in the Investigation MFI for the past five years, dropping to sixth after being fourth in 2010, fifth in 2009 and 2008, and sixth in 2007.
The state is not ranked in the top 10 for loans originated in 2011.
The report also shows that mortgage fraud rates among industry professionals were down in 2011. However, evidence suggests significant increases in potential collusion fraud activity in the past three years.
In 2010 there were 93,508 total Mortgage Fraud Suspicious Activity Reports, according to the FBI. But they are no longer mostly concerned with loan origination fraud. According to the FBI’s Financial Crimes Report to the Public for FY 2010-2011, “for the first time in recent history, distressed homeowner fraud has displaced loan origination fraud as the number one mortgage fraud threat in many offices.” That same report says that FBI mortgage fraud investigations resulted in 1,223 criminal indictments and informations and 1,082 convictions in FY 2011 alone. There are 2,691 pending mortgage fraud cases in fiscal year 2011.
Evidence of collusion by mortgage industry professionals before 2009 was consistent at just below 5 percent of all loan originations. That jumped to 7 percent in 2009, and up to 9.7 percent for 2010. While last year's number dropped to 6.8 percent, it was still slightly higher than historic levels, LexisNexis reports.
According to the FBI report, mortgage fraud schemes employ some type of material misstatement, misrepresentation, or omission relating to a real estate transaction which is relied on by one or more parties to the transaction These schemes include:
- Foreclosure rescue schemes
- Loan modification schemes
- Illegal property flipping
- Builder bailout/condo conversion
- Equity skimming
- Silent second
- Home equity conversion mortgage
- Commercial real estate loans
- Air loans