Florida Mortgage Fraud on the Rise

There are multiple downsides to a cooling housing markets: sellers don’t profit from their homes, potential buyers are afraid that a Florida home loan won’t be a worthwhile investment and home building companies lower their orders.

Here’s another one: Florida home mortgage fraud has grown in recent years. Specifically, foreclosure fraud is on the rise, as the number of foreclosures has risen about 25 percent in the past year. This type of fraud occurs because the original owner, desperate not to lose the home forever, agrees to lease/buyback terms that are essentially impossible to meet.

From a scammer’s point of view, it all makes perfect sense: Why not find a way to latch onto the most expensive asset most people ever own?

There aren’t precise figures for real estate fraud, but the FBI, which uses the term “mortgage fraud” to describe an array of illegal real estate activities, said in a study last year that “based on various industry reports and FBI analysis, mortgage fraud is pervasive and growing.”

It often works in the following way: those involved often falsely inflate the value of a property or issue Florida home loans based on fictitious properties. The FBI study listed the Sunshine State as one of 10 mortgage fraud “hot spots.”

Other schemes involve phony appraisals and doctored documents such as loan applications. In some cases quitclaim deeds are forged to transfer property without the true owner ever knowing. Then, the fraudulent owner sometimes takes out a second Florida home mortgage.

In the most lucrative forms of real estate fraud, “you can close the deal through the mail and walk away with a half-million dollars,” says says Rachel Dollar, a California-based lawyer who handles fraud recovery for lenders and puts together a Web site called MortgageFraudBlog.com. “It’s not surprising it has become the white-collar crime of choice.”

How can it be stopped?

Industry insiders are reluctant to propose more regulation or bureaucracy because it would slow the pace of business. Even Dollar, the cataloguer of real estate crime, doubts that would work.

She says some foreclosure fraud would be avoided if the original owner read the lease/buyback agreement more carefully. But other forms of real estate fraud, especially those involving industry insiders, are hard to prevent because dishonest people allow it to continue. Just like most crimes.

What can you do about? Just stay informed. Remain in touch with a trusted Florida mortgage broker and remain cautious at all times.