Mortgage Fraud: A Scourge of the 21st Century?

ABSTRACT

With many home lending companies currently in a state of crisis, it is important that CPAs be aware of how fraud occurs in the mortgage loan industry. The FBI has defined mortgage fraud as “the intentional misstatement, misrepresentation, or omission by an applicant or other interested party, relied upon by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.” The Mortgage Bankers Association estimates that mortgage loan originations reached $2.28 trillion during 2007. The following are some of the more common and costly schemes involving mortgages and real property: 1. property flipping, 2. air loans, 3. foreclosure rescue scams, 4. cash back purchases, and 5. identity fraud. Overstated income and inflated property values are characteristic of many of these schemes. CPAs can be on the front line of defense against mortgage fraud by understanding the schemes and educating their clients.

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