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California reported among the top states for mortgage fraud

On Behalf of | Sep 25, 2020 | Firm News

When a state develops a bad reputation for a specific crime, it can become increasingly difficult for accused parties to prove they are the exceptions. Not surprisingly, most of the states with the highest rates of mortgage fraud include states where home affordable problems are at their worst. 

CNBC identifies California as just one of many pricey markets with mortgage fraud problems. Others include Florida, New York, D.C. and New Jersey. It also believes that, in every 109 applications, at least one contains mortgage fraud. 

Why mortgage fraud happens

Housing prices are on the rise all across America. In the wake of the 2008 crash caused by the housing market, many lenders also tightened their requirements. Because of this, getting a mortgage is arguably harder than ever for many Americans. Researchers believe this increases the risk of mortgage fraud. The availability of online tools also increases the ease with which people can forge documents. 

Ironically, researchers believe a big portion of mortgage fraud comes from brokers, not consumers. These workers feel driven by the commission to close on a loan and may go to greater lengths to ensure this. In fact, wholesale brokers or lenders account for the greatest portion of applications containing indications of mortgage fraud. 

How authorities discover mortgage fraud

Mortgage fraud statistics continued to rise from 2016 to 2018, in part, because mortgage fraud tips also rose. These are some of the many sources these tips came from: 

  • Law enforcement 
  • Trade groups 
  • Consumers 
  • Lending partners 

After years of spiking, Forbes confirms that mortgage fraud declined in 2019 as interest rates also plummeted. This made it easier for people to qualify for loans. However, the financial realities of 2020 may cause those numbers to climb again.