|
Special Reports
Mortgage Fraud
Fraud Seen as Too Much For Industry to Ignore
By Alton Gary Simpson
IRVINE, CA--The problem of mortgage fraud has grown to such an extent that it
is no longer possible for the mortgage industry or for federal, state and local regulators and legislators to ignore
it, according to Tricia Bailey, president of BrooksAmerica Mortgage Corp. here.
The FBI 2006 Financial Crime Report noted that the number of mortgage related
suspicious activity reports (SARs) that it receives shot up by 62% from fiscal years 2005 to 2006.
"It's definitely become more of an issue during the past few years. It's
really started to take on a lot of steam, which is actually a good thing," said Ms. Bailey, adding that in
the past, industry insiders either ignored the problem or failed to bring it to the forefront. She acknowledged
that lenders would find themselves using the following rationalizations:
• If our lending standards are too high in pursuit of weeding out mortgage fraud,
we will lose market share and eventually go out of business; and
• If our lending standards are too low, we'll gain market share, but eventually
be going out of business.
She said that accepting a certain level of mortgage fraud was seen as part of
the price to be paid for being in the lending business. "But because of the staggering losses that the industry
as a whole has experienced in the last few years and the way the fraud problem has mushroomed with all the creative
loan products, it has really now captured the industry's attention."
Among the statistics raising the lending industry's consciousness about fraud
was the FBI 2006 Financial Crime Report stating that losses stemming from mortgage fraud in 2006 were just shy
of $1 billion. And, as noted the introduction to the Ninth Periodic Mortgage Fraud Case Report to the Mortgage
Bankers Association by MBA president and CEO Jonathan Kempner: "This likely represents only the tip of the
iceberg, as SARs are only required to be filed by federally-regulated institutions."
Ms. Bailey said that she is currently seeing many more lenders sharing information
about mortgage fraud, something that they have been reluctant to do in the past because of competitive pressures.
"We're [lenders] banding together as a group instead of dealing with the losses separately," she noted.
"We're sharing information in order to provide a unified force against these perpetrators and make it more
difficult for them." She added that lenders are being much more aggressive in reporting and going after people
who commit mortgage fraud.
Ms. Bailey also said that the size and scope of the mortgage fraud problem has
also captured the attention of regulators, lawmakers and the FBI. She said that in the past it was at times difficult
to get the authorities to go after the perpetrators of mortgage fraud. And she noted that from her own professional
experience as president of BrooksAmerica Mortgage it could take years to resolve a mortgage fraud case. Ms. Bailey
stated that the added manpower and resources dedicated to fighting mortgage fraud on the part of federal, state
and local governments has begun to speed up the resolution of fraud cases. "Now you are starting to see them
go after these people and put them behind bars," she added. "You're seeing a big crackdown in the industry.
Unfortunately, it has gotten to such a scale that you can't ignore it anymore and that's really the bottom line."
|
