Mortgage Fraud Increasing
According to an article on Realty Times, mortgage fraud grew last year by an astounding 30 percent. The Mortgage Asset Research Institute claims that not only has the incidence of the crime gone up so much, it is also spreading across the US.
The majority of mortgage fraud is due to applicants that have lied about their credit history and income level in order to get their mortgage loan. This activity is not the "minor" offense many might believe: it is a serious a crime punishable by up to 30 years in jail or fines of up to $1 million or both. Unfortunately, in some cases applicants were encouraged by less than scrupulous lending agents to take this action in order to qualify for a loan. These loans are now going sour as borrowers find that they cannot keep up the payments they committed to, particularly with ARMs that had low initial interest rates and have now adjusted.
There are some experts who now say that the "easy money" no-doc loans that became popular during the housing boom may have both fueled increasing prices and the current bust. Lenders later found themselves with an overabundance of risky loans, and quickly turned off the flow of money. That has led to a large increase in borrowers who cannot get loans, coupled with an increase in foreclosures from the current inventory of higher-risk loans. The combination has directly contributed to the fall in housing prices, as the market is flooded with "cheap" homes and the number of buyers is reduced by tougher loan underwriting.
The bloodletting is not over yet: HousingPredictor.com says that housing prices will continue to fall this year, by an average of 4.2 percent.