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Mortgage fraud rising fast, FBI says

WASHINGTON — The sinking housing market is fertile ground for mortgage fraud, the FBI warns in a new report.

The agency said Tuesday that reports of suspected mortgage fraud rose 31 percent to 46,717 in fiscal 2007, which ended Sept. 30, up from 35,617 in the previous fiscal year.

In the first half of fiscal 2008, there were more than 33,000 such reports, quickening the pace of mortgage fraud for this fiscal year, an FBI spokesman said.

Last month, the Treasury Department, which uses the calendar year to tally reports, put the mortgage fraud damage for 2007 at nearly 53,000, a 42 percent jump.

Earlier this year, the industry-funded Mortgage Asset Research Institute said Florida led the led the nation in mortgage fraud in 2007 for the second straight year, followed by Nevada, Michigan, California, Utah and Georgia.

The FBI said that mortgage fraud losses in fiscal 2007 totaled more than $813-million, though only 7 percent of "suspicious activity" reports detailed the loss in dollars.

That number "is just the tip of the iceberg, reflecting only a small percentage of financial damage suffered by victims of mortgage fraud," said Kenneth Kaiser, the FBI's assistant director in charge of the bureau's criminal investigations division.

Common types of mortgage fraud are misrepresentation of income or assets, forged documents, misrepresentation of a borrowers' intent to occupy a property and inflated appraisals.

The depressed housing market provides an "ideal climate" for perpetrators of fraud, the FBI report said, adding that identify theft, particularly targeting borrowers with good credit, is likely to increase. It also warned of other scams, promoted as foreclosure rescues.

The FBI is investigating more than 1,300 mortgage fraud cases and conducting 19 corporate investigations linked to the subprime lending crisis. Federal authorities have formed a task force, headed by prosecutors in New York, to determine if lenders or Wall Street firms participated in fraud.

Housing horrors

Median home prices fell in two-thirds of the cities surveyed during the first three months of this year, the National Association of Realtors reported Tuesday. The trade group said median prices for existing single-family homes dropped in 100 of 149 metropolitan areas in the January-March period. The percentage of areas with declining prices was the largest in the history of the Realtors' survey, which started in 1979. Nationally, the median home price fell to $196,300 in the first quarter, down by 7.7 percent from the same period a year ago, when the median sales price was $212,600.

Mortgage fraud rising fast, FBI says 05/13/08 [Last modified: Tuesday, May 13, 2008 11:17pm]
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