In my recent blog post - Mortgage Fraud - "Universal Truths" - Part 1 - I listed Brad Geary's, Assistant Special Agent in Charge from HUD - Chicago, OIG Universal Truths of Mortgage Fraud listed below. According to Mr. Geary "Virtually all mortgage fraud combines at least two of these items."
- Appraiser Fraud
- SSN / Identity Fraud
- Credit Reports / Letters of Explanation
- Ernest Money & Closing Costs
- Verification of Employment
- Verification of Bank Statement (Deposits)
- Verification of LandordIn a recent blog post
Today's Realty Times article "Appraisals Part of All Fraud Loans" by Lew Sichelman takes the "Universal Truth" statement above a step further and says . . .:
"A faulty or even fake appraisal is said to be at the basis of every fraudulent mortgage transaction. But not every appraiser is at fault, or at least willingly so."
The article points out some of the ways an appraiser can "fudge a valuation":
- appraisers can ignore the best comparables,
- appraisers can use properties in better neighborhoods as comps
- appraisers can mis-describe a property.
- appraisers can fail to mention physical problems.
For the complete Realty Times article : Published: June 7, 2006 - Click here.
The article also points out that appraisers aren't the only ones who commit such flagrant fouls.
Loan brokers have been known to
- alter values by changing the values (adjustments) of each comparable
- delete noted physical issues or other undesirable influencesin the appraisal
- or even forging their own appraisal reports.
Make fraud cost, not pay - A Countrywide spoksman was quoted as suggesting the installation of "an independent hotline so appraisers can report pressure and keeping an internal "Do Not Use" list of suspected bad actors."
"Emblematic of the scope of the mortgage fraud problem throughout the country is what's going on in Illinois, where three out of ten appraisals are found to be forged, according to Robert Gorman, an East Hazel Crest, Ill., appraiser. "That's a significant number," he told the meeting. "And that's only the ones we know of. Who knows what we don't know?"
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