When the notorious housing bubble was forming some years ago a lot of factors were aiding and abetting its run to those dizzying, unsustainable heights. One of them was mortgage fraud. Banks were so busy crafting new and glitzy home loan products and making money hand over fist with them that often they overlooked questionable mortgage loan applications. When opportunity knocks, it has to be taken full advantage of, seems to have been the going motto then.
But things have changed drastically in the mortgage world since the air rapidly hissed out of the bubble. Investors, who bought mortgage-backed securities, or MBS, have increasingly requested lenders take back fraudulent loans. That has prompted them to tighten their mortgage guidelines, as it really hurts their bottom line to buy back all sorts of wayward paper. Besides tougher guidelines, application information is also more carefully verified for a change.
First American CoreLogic recently released a study stating that one in 200 mortgages closed in 2009 was fraudulent. In money terms it added up to $14 billion. It sounds like a lot, but it is actually down roughly 25% from a historical high in 2007, now progressing steadily south. It's also predictable that this trend will continue in the coming years, at least as long as mortgage lenders keep hurting the way they do today.
Las Vegas mortgage fraud doesn't make top of list
According to First American CoreLogic's analysis - based on 80 million mortgages scrutinized by its proprietary national fraud data depository - California, Florida, Georgia, North Carolina and South Carolina were among states with most fraud-tainted home loans. The first two were kind of expected to be there due to their overheated markets a few years ago and subsequent high foreclosure rates. In the firm's findings 25% of foreclosures display fraud at the time the original mortgage application was taken. Nevada, spearheaded by the populous Las Vegas valley, for once isn't included among top contenders on a list like this. It has definitely adorned many of them already, so being outside now is certainly cause to hoist a cold one for. Even though Nevada's foreclosure figures are the highest in the nation, it still didn't break into the top five here.
Mortgage fraud for now is decreasing, an entirely encouraging sign. Once lenders climb back on their feet one of these days, it's anyone's guess what will happen then. Will this crippling downturn teach them a lesson to last? Or will the lure of ever increasing earnings again push them into reckless behavior?