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Pensacola Real Estate News: Mortgage Fraud on the Rise

In recent days, reports have been coming out that indicate the FBI has increased their real estate mortgage fraud caseload. That is not a big surprise, as a down real estate market provides an ideal climate for mortgage fraud perpetrators.  

Examples of real estate mortgage fraud include builder bailouts, seller assistance, foreclosure rescue and identity theft in exploiting home equity lines of credit. An example of a builder bailout scheme would be a builder providing undisclosed incentives to buyers, such as returning the down payment.

Remember, to stay out of trouble, make sure everything is openly disclosed to all parties, including the lender. As a real estate buyer, don’t let a seller try to provide you any incentives to buy that are not fully disclosed in writing.

The FBI had more than 1,200 mortgage fraud investigations open at the end of fiscal year 2007. This is a 47 percent increase from the previous year but still is estimated to be a small fraction of suspected cases. The number of suspicious activity reports (SARs) filed by banks detailing suspected mortgage fraud grew 31 percent during this same period, to 46,717. Although federally chartered banks are required to file SARs with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), many other mortgage lenders are exempt, suggesting that the FBI is investigating only a small fraction of mortgage fraud cases.

The FBI said the top 10 worst states for mortgage fraud were Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado and Minnesota.

A Pensacola real estate attorney spoke recently at a Pensacola Real Estate Navigators meeting. She told the audience about a local case of mortgage fraud that she handled. A man had bought a house and lived in it for only a few years. He then forged a Satisfaction of Mortgage and recorded it in the public records. Thus it appeared that he owned the home free and clear. He then applied for a home equity loan. In doing the title work, the attorney became suspicious, as it is rare that someone pays off a home in a few years. She checked with the bank and found that they still held the mortgage and it had not been paid off.

The attorney went ahead with the closing on the home equity loan. The man came into her office and signed the necessary paperwork. On his way out, the police were waiting for him. He was arrested and taken away.

It is not worth it. Disclose everything to your lender and to your buyers if you are the seller. In the long run, this ensures that everything is legal and no one ends up ruining their life over simple and plain greed.

Fortunately, there is relatively little mortgage fraud in the Pensacola Florida area. Most of the real estate fraud in Florida will be in the southern part of the state. See related articles below.

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  1. Wasilla Real Estate News

    Yikes, bad move on his part. Mortgage fraud is everywhere…even here in Alaska. I think the criminals almost feel that it’s not stealing because they don’t see the victim.

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