Mortgage Fraud Led By California, Florida, Arizona and Nevada

By Mike Colpitts

Mortgage fraud is blamed for trillions of dollars in failed loans in the U.S., especially in California, Florida, Nevada and Arizona, monopoly money where incidents have been the highest and foreclosures make up the largest volume of troubled homeowners, according to federal authorities. But state and federal law enforcement agencies are encountering major problems prosecuting many of the fraudsters.

A federal panel holding public hearings throughout the nation has been focused on liar loans, predatory mortgages and dubious home appraisals, concluding that the financial impact from the mortgage crisis has run into trillions of dollars. The hearings were held to provide the context for Congressional members to legislate changes in the mortgage lending system.

“I was stunned at the extent and the dollar impact of mortgage fraud,” said Florida Senator Bob Graham, a commission member. More than 90% of all mortgages investigated by FDIC auditors looking into banks that are secured by FDIC insurance are rife with fraud. “It’s rare when there is a mortgage file that isn’t fraudulent,” said an FDIC auditor.

The FBI has been warning for more than eight years that real estate fraud was at epidemic levels. Law enforcement officials face a series of issues as they try to investigate real estate fraud allegations, including limitations on the statue of limitations to charge individuals who committed fraud with criminal acts.

The U.S. Savings and Loan Crisis saw more than 1,600 mortgage and banking executives charged with white collar crimes related to the crisis in the 1980s, many of whom were later jailed on convictions for their offenses. The U.S. attorney’s Mortgage Fraud Strike Force has attained 405 convictions since 2007, and is expecting to double that figure in 2011.


The Mortgage Lender Implode-O-meter (, a website that tracks bank failures related to the crisis reports that 387 banks have failed since 2006. Hundreds of mortgage brokers, real estate specialists, bankers and consumers have been prosecuted under state statues for criminal fraud. Most fraud, however, has not been reported until mortgages are in default, and in Florida for instance, state statue limits for prosecuting fraud is three years.

Years after the real estate bubble burst John Anderson, president of Oyezz Real Estate in Dallas, Texas specializes in troubled residential sales, and warns consumers to watch out for companies wanting to collect for services in advance. Anderson says homeowners should never pay anyone or any company an up-front fee to conduct a loan modification, arrange a short sale or stop a foreclosure.

“When someone is under financial stress, they are much more vulnerable to becoming a victim of fraud,” said Anderson. “Homeowners have to look past the smooth talk and appealing promises and thoroughly research the people and companies they choose to help them address their problems.”

Another danger for troubled homeowners is the prospect of signing documents related to their homes with anyone other than a title company or attorney. Any legal documents that transfers home ownership could produce the loss of a homes ownership with little or no guarantee of the lender eliminating a mortgage owed on the property.

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