Mortgage Fraud: Causes and Consequences Presented by Ed Rybczynski

Mortgage Fraud: Causes and Consequences

Fiduciary: Someone who is legally obligated to place the interests of someone else ahead of his or her own. Federal prosecutors used the word often .

Accountability: You can’t say that you didn’t know . You can’t say that you didn’t understand . You can’t say that you can’t remember .

You can’t say that you didn’t know .

You can’t say that you didn’t understand .

You can’t say that you can’t remember .

“It is a crime to knowingly make false statements to the United States on this or any other similar form. Penalties upon conviction can include a fine and imprisonment.” Warning on Hud 1:

“It is a crime to knowingly make false

statements to the United States on this

or any other similar form. Penalties

upon conviction can include a fine and

imprisonment.”

Visible arrest at home or office Much harsher sentence Mid security facility

Visible arrest at

home or office

Much harsher

sentence

Mid security

facility

Signs: A new source of business appears.

A new source of business appears.

Signs: A new source of business appears. You start to feel uncomfortable.

A new source of business appears.

You start to feel uncomfortable.

US Attorney, State of Michigan: The mortgage lending process depends on the honesty of brokers, appraisers, and real estate agencies. When this process is corrupted by a team of fraudsters … the result will be federal prosecution.

US Attorney, State of Michigan:

The mortgage lending process

depends on the honesty of brokers,

appraisers, and real estate agencies.

When this process is corrupted by a

team of fraudsters … the result will be

federal prosecution.

Mortgage Fraud: Failure to disclose ANYTHING to the lender!

Mortgage Fraud:

Failure to disclose

ANYTHING to the

lender!

Best Practices: Credibility Reputation Fraud prevention Litigation avoidance Class Action

Credibility

Reputation

Fraud prevention

Litigation avoidance

The above image was copied from the company’s website. Mortgage Bankers, Ltd. was indicted by a federal grand jury in February, 2007.

Did You Know Facts about mortgage fraud and foreclosure rates

Did You

Know

Subprime mortgages account for about 14% of all first lien mortgages, but …

Subprime mortgages account

for about 14% of all

first lien mortgages, but …

… accounted for 50% of foreclosures 4th quarter of 2006 .

… accounted for

50% of foreclosures

4th quarter of 2006 .

There's a direct correlation between the fees and points charged by a mortgage broker and …

There's a direct correlation

between the fees and points

charged by a mortgage broker

and …

… the incidence of misrepresentation in a loan package.

… the incidence of

misrepresentation

in a loan package.

A mortgage is 5 X more likely to default in the first 6 months if …

A mortgage is 5 X more

likely to default in the

first 6 months if …

… it’s application contains misrepresentations .

… it’s application contains

misrepresentations .

The probability of default for a subprime loan is ...

The probability of default

for a subprime loan is ...

… 6 X that for a prime loan.

… 6 X that

for a prime loan.

It's estimated that mortgage fraud losses for 2006 will reach ...

It's estimated that mortgage

fraud losses for 2006

will reach ...

… $4.2 Billion.

… $4.2 Billion.

In 2006, mortgage fraud was 10 X more pervasive than …

In 2006, mortgage fraud

was 10 X more

pervasive than …

… credit card fraud.

… credit card fraud.

Foreclosure rates climbed 35% in 2006!

Foreclosure rates

climbed 35%

in 2006!

It’s a bitter pill to swallow!

It’s a bitter pill

to swallow!

California Florida Georgia Illinois Indiana Michigan New York Ohio Texas Utah Mortgage Fraud Hot Spots 2006 per FBI

Captured Nov 16, 2006 Matthew Cox

Captured

Nov 16, 2006

CONSUMERS Do they know enough to commit fraud without coaching from an industry insider?

CONSUMERS

Survey results: 55 percent of professional appraisers surveyed reported feeling pressured to inflate property values by real estate agents and loan officers. October Research (2003)

55 percent of professional

appraisers surveyed reported

feeling pressured to inflate property

values by real estate agents and

loan officers.

Survey results: 90 percent of professional appraisers surveyed reported feeling pressured to inflate property values to levels to make deals work. October Research (2006)

90 percent of professional

appraisers surveyed reported

feeling pressured to inflate property values to levels to make deals work.

In the 2006 study, 75 percent of the appraisers surveyed reported threats of “ negative ramifications ” for lack of cooperation.

In the 2006 study, 75 percent of the appraisers surveyed reported threats of “ negative ramifications ” for lack of cooperation.