Banking Law

I'm not sure whether to be comforted or discouraged by the news that Interthink's Quarterly Fraud Risk Review Index shows that while mortgage fraud remains "substantially unchanged" last quarter when compared to the second quarter of this year (and is down from last year), the nature of the fraud has changed. In the recent past, much mortgage fraud was perpetrated by bad actors in the mortgage business, sometimes crooked brokers (mortgage and real estate), appraisers, investors, "straw men and women," and even (The Horror! The Horror!) lawyers, and sometimes by "professional crooks" who learned the fine art of mortgage fraud behind bars. In the third quarter of 2010, however, it appears we've returned to those days of yesteryear when men were men, women were women, and Johnny Cash was a boy named "Sue," days when most mortgage fraud was the act of a couple of people just trying to grab their little piece of the American Pie: Mr and Ms. Wanna-be Homeowner.

[T]he data analytics firm said emerging trends suggest a shift from fraud for profit to fraud for homeownership.

[...]

Interthinx tracks four type-specific fraud risk indices. The identity fraud and employment/income fraud risk indices both spiked in 3Q compared to a year ago, up 24% and 23%, respectively. This, Interthinx said, suggests an increase in "fraud for property," a fraud niche that has long been considered less dangerous than other types.

Fraud for property is essentially fraud to attain homeownership and is measured against "fraud for profit."

Of course, this return to the bad old days makes those of us who worry about "moral hazard" (i.e., me and three Franciscan monks in Butte, Montana) start to get a little queasy feeling in our stomachs and to hear the echos of the voice of Chaz Scuhumer bellowing about "liar loans."

"Since frauds for property sparked the mortgage meltdown as unqualified borrowers began to default in large numbers, it is clear that frauds for property must be identified and addressed going forward with the same urgency as frauds for profit," the report said.

Ya' think?

Perhaps this is yet another reason why applicants for home mortgages these days are being waterboarded, interrogated under Sodium Pentathol, and forced to pledge their small children (and/or household pets) as collateral before a lender will make them a mortgage loan. Maybe it's not all Fannie's and Freddie's fault after all.