Reverse Loans Continue to Be Targeted by Scams, FBI Report Says

The Federal Bureau of Investigation (FBI) recently reported an increase in mortgage fraud during 2009, including scams involving reverse mortgages. Pending mortgage fraud investigations by the FBI rose 71% in 2009, compared with 2008. Also, 66% of pending mortgage fraud investigations by the FBI involved dollar losses totaling more than $1 million.

“While the total dollar loss attributed to mortgage fraud is unknown, First American CoreLogic (using mortgage loan data representing 97 percent of all U.S. properties) estimates that $14 billion in fraudulent loans were originated in 2009 ($7.5 billion in FHA loans and $6.5 billion in conforming loans),” according to the study.

Reverse Mortgage Fraud Makes List

The most common types of mortgage fraud include “loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, home equity line of credit (HELOC), illegal property flipping, reverse mortgage fraud (currently the FHA’s Home Equity Conversion Mortgage [HECM] and the primary reverse mortgage loan product being offered by lenders and targeted by fraudsters), credit enhancement, and schemes associated with loan modifications.”

Industry Insiders and Fraud

Other emerging types of mortgage fraud involve short sale flops, condo conversion, and schemes involving economic stimulus programs. While much of the fraud is perpetrated by what the FBI calls “industry insiders, including mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, and bank and trust account representatives.” But there also has been an increase in mortgage fraud activity by gangs and organized crime.

There is concern that if the economy continues to struggle, mortgage fraud schemes could continue to spread, especially foreclosure rescue scams. If you are interested in getting a reverse home mortgage to avoid foreclosure, make sure you talk with a HUD-approved counselor to get the facts. You can also gather quotes from a reputable net work of reverse mortgage lenders here.

This entry was posted on Wednesday, July 21st, 2010 at 12:32 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.