FHA Mortgage Fraud Down, Says FBI
May 16th, 2008
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The FBI is reporting that fraud investigations associated with the FHA mortgage program declined in fiscal 2007, the period between October 1, 2006 and September 30, 2007.
According to its 2007 Mortgage Fraud Report, the FBI says that fraud investigations fell in fiscal 2007 because of a “substantial decline in FHA market share. One reason for the FHA loss of market share was the increased prevalence of subprime loans from commercial lenders; many of those who might typically have applied for FHA loans instead opted for subprime loans.”
Now that FHA market share is increasing can we expect more investigations of mortgage fraud? Also, how many borrowers “opted” for subprime loans if they could have obtained an FHA mortgage without prepayment penalties or steep rate increases?
Notice that the list of states with the most investigations are not the states with the largest populations or most foreclosures. It may be that what we are looking at are areas with the best ability to ferret out crime.
The FBI report photos above seem to show a property that has been demolished or vandalized. Actually, says the FBI, the photos “are from condos that were involved in a mortgage fraud. The appraisal described ‘recently renovated condominiums’ to include Brazilian hardwood, granite countertops, and a value of $275,000.”
US Department of Housing and Urban Development — Office of Inspector General
HUD-OIG is charged with detecting and preventing waste, fraud, and abuse in relation to HUD programs. As part of this mission, HUD-OIG investigates mortgage fraud related to Federal Housing Administration (FHA) loans. As of 30 September 2007, HUD-OIG had 466 single family (SF) residential loan investigations pending. In FY 2007, HUD-OIG opened 151 SF mortgage fraud investigations, a decline from the 239 SF mortgage fraud investigations opened during FY 2006. This decline can be attributed to the substantial decline in FHA market share. One reason for the FHA loss of market share was the increased prevalence of subprime loans from commercial lenders; many of those who might typically have applied for FHA loans instead opted for subprime loans. In addition, FHA loan levels were often not competitive in many real estate markets. Consequently, HUD-OIG witnessed a parallel decline in FHA mortgage fraud investigations. Recently, FHA has made several significant changes in its SF loan program, including substantially increasing loan levels in high-cost areas, and making efforts to have those currently holding subprime loans, or facing foreclosure, to refinance those loans with FHA. As a result, the FHA market share is expected to increase, with a parallel increase anticipated for HUD-OIG’s investigative case load.
HUD-OIG’s top 10 mortgage fraud states based on investigations opened during FY 2007 included Ohio, Maryland, Illinois, Georgia, Texas, Virginia, California, North Carolina, Michigan, and New York, respectively. Also, the top 10 state for pending investigations during the same time period included California, Illinois, Texas, Maryland, Ohio, Georgia, New York, Colorado, Florida, and Missouri.
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May 24th, 2008 at 10:52 pm
If they are using units instead of percentages to determine if the number is up or down - of course the number is down - originations overall are significantly down. They should be using percentages of fraud cases against the total number of originations.
January 22nd, 2009 at 6:40 am
No its not, we recived an order for an FHA appraisal and the next day the company called back and said the home owner requested her own appraiser and they gave it to him. Wonder how her FHA loan will work?