Make us your home page

Florida again No. 1 in mortgage fraud

Among the 50 states, Florida once again is the mother of mortgage fraud.

Soaring rates in the state, specifically of appraisal fraud and misrepresentation, guaranteed Florida retained the No. 1 ranking in 2009 for the fourth year in a row.

An annual ranking unveiled Monday by the Mortgage Asset Research Institute found that, given the volume of residential mortgages it originates, Florida had close to three times the expected amount of reported loan fraud and misrepresentation.

That made Florida No. 1 by a comfortable margin in the country, ahead of the next closest states New York, California, Arizona and Michigan.

"If left unchecked, this (fraud) trend will bankrupt the nation's lending industry and keep investors from ever returning to the mortgage sector, restricting mortgage availability to a privileged few," concludes the MARI report.

Florida's ranked tops in mortgage fraud since 2006, the year the housing bubble burst and the state's economy began to suffer a toxic shock of plummeting home prices and soaring unemployment.

Efforts to stem mortgage fraud, mostly via high-profile federal task forces dedicated to Florida, have earned some publicity but made few serious dents in the problem. In November, for example, federal prosecutors announced a nine-month investigation had nabbed more than 100 defendants and 700 properties from Tampa and Orlando to Jacksonville and Fort Myers. But none of the 22 Tampa Bay area cases involved the kind of major fraud that helped crash the U.S. economy.

The failure to stem Florida's epidemic of mortgage fraud imperils the state's already weak economy.

"The alarming trend from Florida has the potential to threaten that state's housing recovery more than others, given the area's track record in mortgage fraud and excess inventory, particularly in the condominium market," says Darius Borzogi, CEO of Veros, a California company that tracks mortgage trends in 14,000 ZIP codes.

Nationally, reported incidents of mortgage fraud and misrepresentation by professionals increased 7 percent from 2008, a record year, to 2009.

Why did that happen if the housing market by 2009 was in tatters and the volume of mortgages and home sales had declined?

Several reasons, MARI said. New technology and changes in the mortgage market created new opportunities to take advantage of consumers. Fraudsters were also motivated to maintain "lifestyles obtained during the boom period." Consumers who were desperate for the American dream of home ownership remained easy targets. And, MARI said, mortgage fraud was fed by the need for new, creative methods of moving illicit funds.

For example, 2009 saw record foreclosures in several major metropolitan areas, especially in Florida. That led to the emergence of several different types of foreclosure rescue scams.

Let me suggest another reason Florida stays atop the fraud chart. Scam artists recognize the likelihood of getting caught is small by a law enforcement community late to respond and overwhelmed by the sheer size of the problem.

In Florida, the subcategory of appraisal fraud soared in 2009, jumping to 36 percent from 18 percent of reported cases in 2008. No other fraud category in Florida reported such a dramatic increase.

The MARI report says the most common types of appraisal fraud and misrepresentation for loans originated in 2009 involve incorrect (or fabricated) comparables, omitted information affecting a home's value, and value inflation.

Appraisers are under pressure, the report acknowledged, because it's already tough to complete a home sale given the tight market for mortgages and more conservative financial assessments of potential buyers. Appraisers who do not deliver relevant values fear they may lose future opportunities for business. Some agree to "predetermined" valuations. Still others unfamiliar with certain housing markets, may provide appraisals too high or low to be of use in closing a sale.

As the MARI report notes, appraisal fraud was probably plentiful earlier when housing prices were still rising, but few cared enough to report it because it did not jeopardize the purchase.

Without tougher action, the mortgage fraud epidemic now endangers our entire recovery.

Contact Robert Trigaux at

Mortgage fraud, misrepresentation in Florida

There are various kinds of mortgage fraud. Some lie on the application. Others use fraudulent information about appraisals, credit history or employment. Of the fraud cases identified in 2008 and 2009 in Florida, here is a breakdown of the percentage of cases that used the various kinds of fraud. The numbers add up to more than 100 percent because, in some cases, more than one kind of fraud was used.

Application67 percent42 percent
Verification of employment21 percent15 percent
Verification of deposit

and/or bank statement
20 percent11 percent
Tax return and/or

financial statement
29 percent26 percent
Appraisal18 percent36 percent
Credit history4 percent4 percent
Documentation escrow

and/or closing documentation
10 percent2 percent
Source: Mortgage Asset Research Institute April 2010 annual survey

Florida again No. 1 in mortgage fraud 04/26/10 [Last modified: Tuesday, April 27, 2010 9:34am]
Photo reprints | Article reprints

© 2017 Tampa Bay Times


Join the discussion: Click to view comments, add yours

  1. Pinellas construction licensing board needs to be fixed. But how?

    Local Government

    LARGO –– Everyone agrees that the Pinellas County Construction Licensing Board needs to be reformed. But no one agrees on how to do it.

    Rodney Fischer, former executive director of the Pinellas County Construction Licensing Board Rodney, at a February meeting. His management of the agency was criticized by an inspector general's report. [SCOTT KEELER   |   Times]

  2. New owners take over downtown St. Petersburg's Hofbräuhaus


    ST. PETERSBURG — The downtown German beer-hall Hofbräuhaus St. Petersburg has been bought by a partnership led by former Checkers Drive-In Restaurants president Keith Sirois.

    The Hofbrauhaus, St. Petersburg, located in the former historic Tramor Cafeteria, St. Petersburg, is under new ownership.

  3. Boho Hunter will target fashions in Hyde Park


    Boho Hunter, a boutique based in Miami's Wynwood District, will expand into Tampa with its very first franchise.

    Palma Canaria bags will be among the featured items at Boho Hunter when it opens in October. Photo courtesy of Boho Hunter.
  4. Gallery now bringing useful art to Hyde Park customers


    HYDE PARK — In 1998, Mike and Sue Shapiro opened a gallery in St. Petersburg along Central Ave., with a majority of the space dedicated to Sue's clay studio.

     As Sue Shapiro continued to work on her pottery in St. Petersburg, her retail space grew and her studio shrunk. Now Shapiro's is bringing wares like these to Hyde Park Village. Photo courtesy of Shapiro's.
  5. Appointments at Raymond James Bank and Saint Leo University highlight this week's Tampa Bay business Movers & Shakers



    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. Jackson will oversee all of Raymond James Bank's operational business elements, risk management and strategic planning functions. Kackson joins Raymond James Bank after senior …

    Raymond James Bank has hired Grace Jackson to serve as executive vice president and chief operating officer. [Company handout]