Mortgages only a criminal could love

As the economy worsens, politicians will continue to debate prescriptions for the ailments on one hand, while casting blame on those who supported policies that now seem to have become injurious on the other.

What all can agree on is that mortgages are at the epicenter of the financial crisis that we are now dealing with. Homeowners are struggling to make their payments, lenders can’t sort the bad mortgages from the good, and investors wouldn’t trust lenders even if they could do so.

But mortgages won’t disappear. They’ll be modified, restructured, refinanced or governmentally subsidized by the Federal Housing Administration, U.S. Department of Housing and Urban Development or another agency. And with increased money comes opportunities for increased criminal activity. To be sure, criminals love mortgages in the bad times as well as the good.

According to MSNBC.com, the Mortgage Asset Research Institute reported mortgage fraud this year to be already up by 42 percent in comparison to last year. California has the dubious distinction of ranking second behind Florida as the state with the most mortgage fraud.

While it is true the majority of fraud-referred to by the FBI as “fraud for property”-tends to involve homeowners embellishing their incomes and fudging their employment dates, there is a more sinister and costly type of fraud called “fraud for profit.” Typically, this consists of homeowners applying for multiple home equity lines of credit (HELOCS) at the same time, and services that sell assistance to homeowners to help them with avoiding foreclosure, ironically enough.

Multiple HELOC applications frequently are approved before a lien from one lender can be documented on the property’s title, an action that customarily ranges from weeks to months to be accomplished, thus leaving the borrower with more cash than his property is actually worth. Foreclosure avoidance services tend to rely on manipulating deeds and counterfeiting loan documents.
Title insurance plays a key role in preventing mortgage fraud. When I worked in the title insurance industry, I researched information on almost 1,000 homes. I discovered unpaid liens, judgments, unrecorded mortgages and stipulations. If left unheeded, these would have carried legal ramifications, buried in divorce decrees. Mortgages are a fine-print kind of business, and in times such as these, there needs to be more fine print. We must institute the following if we are to ensure a more safe and efficient system that discourages both types of fraud:

Require a time standard as to when a lien must be filed in property records. This would lessen the chance of a borrower receiving an inordinate amount of money.

Petition for a different payment model for real estate agents, loan officers and brokers. The commission system has encouraged reckless and unethical behavior.

Regulate the foreclosure avoidance service industry. All manners of businesses and unscrupulous characters derive profit from here.