Posted May 12, 2007 12:25 am CDT
Mind-boggling amounts of mortgage fraud by rings throughout the country may be responsible for big increases in U.S. home prices.
If so, what went up can also come down, reports the Washington Post in a lengthy article detailing tens of millions of dollars in documented mortgage fraud by rings involving lawyers and other professionals. So-called liar loans (for which mortgage brokers often encourage buyers to overstate their income) and straw buyers (fictitious purchasers) have been commonplace. In fact, they have apparently permeated much of the country with fraud-for-housing schemes intended to help buyers get mortgages they intend to pay but otherwise wouldn’t qualify for and more insidious fraud-for-profit schemes intended to scam money from mortgage lenders, the Post says.
One man convicted in March in an Atlanta mortgage fraud ring personally obtained $14.5 million, the article reports, although his lawyer says his client maintains his innocence and plans to appeal. The overall case involved some 400 fraudulent loan applications, $100 million in mortgages and 120 appraisers, mortgage brokers, real estate attorneys and other professionals who prosecutors contend were aware of the scam, the Post states.
“By the time we prosecute, the damage has been done, the neighborhoods are already destroyed and the money is gone,” says David E. Nahmias, the U.S. attorney who oversaw this Atlanta case. According to the Post, entire neighborhoods and condominium projects in Atlanta were targeted by organized mortgage fraud rings, artificially inflating home values, which are now taking a hit. Although no one knows how extensive the problem has become nationwide, it may have increased by 1000 percent in the last seven years, the newspaper says.