No Surprise Here: Mortgage Fraud Is Increasing Again

Mortgage application fraud risk in the U.S. has been steadily increasing at the national level since CoreLogic started tracking this data in 2010, and according to new analysis, fraud risk is becoming more prevalent in larger metropolitan areas, particularly in the Northeast and Southeast. CoreLogic Insights Blog

It was only a matter of time before the mortgage data started reflecting mortgage fraud again. I have suspected that mortgage application fraud had been rising with the sudden re-emergence of home-flipping and the “get-rich quick – find it, finance it, flip it” seminars proliferating in the larger metropolitan areas. The hot-spot fraud and flip areas the first time around are largely the hot-spot fraud and flip areas now: California, Nevada, Florida and the northeast.

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Often overlooked is Colorado, which at one point during the last bubble collapse was in the top-5 for foreclosures. For the past year, up until about four weeks ago when the market seems to have stalled, Denver was as hot as any market in country as “investor/flippers” began bidding wars on homes. Wash, rinse, repeat. Just like stock market chasers, the retail home bubble chasers will never learn…

Not surprisingly, the CoreLogic study found that mortgage application fraud risk was increasing with purchase applications and decreasing with refinance applications and is directly linked with the quality of borrowers. I have no doubt that the rising purchase application fraud is highly correlated with the fact that “individual investors” are now typically financing their purchase with a mortgage rather then will all-cash (“find it, finance it, flip it”):

a growing number of investors are not buying all-cash, but instead are taking advantage of the broader set of financing options now available to them thanks to a new crop of nationwide companies that have emerged offering financing specifically for investment properties…In the universe of non-owner-occupied purchases, 44.7 percent were to all cash buyers, down from 61.0 percent a year ago to the lowest quarterly level since the first quarter of 2011. – Daren Blomquist, VP at RealtyTrac

Thus, while institutional investors are pulling out of the market, mom and pop retail investor/flippers are piling in. Sound familiar, as in, retail investors always chase market tops…

It’s no coincidence that mortgage purchase application fraud is rising with the rise individual retail investor home buying. While the non-doc liar loans have not made a comeback yet, there is evidence that flippers are masquerading as “vacation home buyers” in order to obtain financing:

The record supply of non-owner occupied single and multi-fam “investment” properties – and fraudulent loans for “vacation houses” that are really flips or rentals — owned by a small slice of the population will hit the supply chain much quicker than millions of foreclosures did from a wide base of the population in Bubble 1.0.Mark Hanson.com

Hanson, who has a real estate consulting practice, goes on to say: “Hard-core speculation is back – some 40% of all transactions according to my calcs — complete with occupancy and appraisal fraud, process incompetence, willful blindness, and relationship-driven dissonance in lending, just like 2003 to 2007.”

While Hanson does not provide a source link for his assertion about the escalating fraud in the mortgages and appraisals, the CoreLogic article linked above explains that rising mortgage fraud is associated with purchase mortgages and the RealtyTrac data shows a huge spike in purchase mortgages coming from individual investors.

This is “old wine in a new bottle.” The housing market has once again become infested with rampant speculation and fraud. I will have more on this topic soon, including a discussion about how the National Association of Realtors manipulates its existing home sales data to the extent that it has become highly misleading.

I am confident that we’re about to see this housing bubble 2.0 collapse. I know that in the entire metropolitan Denver area home listings are quickly escalating and homes are now sitting on the market. I get “price change” alerts in my email several times a day now from REColorado. The higher end of the market – over $800k – is literally flooded with inventory.

With auto sales now apparently turning down, once the rug is pulled out from under the housing market this country faces an economic collapse. The biggest problem for the elitists trying to hold this up is that they are out of interest rate bullets and if they announce QE4 it will signal a helpless and desperate attempt to revive an economic corpse.

If you are facing legal action due to being charged with mortgage fraud, it’s important not to understate the severity of the repercussions. Because of this, you might want to contact a criminal lawyer who could help you and your case.

4 thoughts on “No Surprise Here: Mortgage Fraud Is Increasing Again

  1. Dave,

    They won’t announce QE4. They’ll just do it. Or if you believe Jim Willie, they already are thru the BLICS ( Belgium, Liechtenstein, Ireland, Cayman Islands, Switzerland ). Do the words hyper monetary inflation, capital controls, and martial Law mean anything to you ?

  2. Once again its Dave to the ramparts to challenge the hyperbole of the latest reports saying its all good! Definitive to clarify its not the natural juices moving the numbers. Its just more of the same old Bankster moves in concert with the sleazy flippers and scammers. Once more we will jam up the deficit thru deceit and slight of hand…criminal that is. Had to laugh about the reference to find it, finance it, and Flip it…reminded me of the rough reference to the battle between the sexes. Find it, **** it, and forget it. I could say with some range of degree they are pretty interchangeable here…..

  3. Dave, this reminds me of that old story of a group of bankers. Who had been marooned on a deserted island. They all became fabulously wealthy by trading each other their clothes!

  4. The real estate market is not healthy, and any Realtor or economist who suggests it is likely has some sell-side agenda. Here in West Houston, prices are already starting to roll over. One of the hottest communities in the country last year in Fort Bend County, recently posted the third consecutive month of lower year-over-year prices (both average price and the more relevant price per square foot). Closer in to town, Houston area prices have been holding up or rising slightly this year, but I suspect Houston in general will roll over as well as the dead-cat bounce in oil fades, resulting in more job cuts before the year ends. One of my friends working at a major oil company said the efficiency experts were visiting his company next month so they could get the workforce reductions started. CEOs for the majors are now more interested in saving their own ass and their bonus rather than looking for sustainable growth opportunities.

    I find it comical that the Greater Houston Partnership just last week cut its 2015 jobs forecast in half. They were rather late to the party, and their estimates are still ridiculously optimistic. Houston is particularly at risk to a stock market correction because all of these nitwits are still banking on continued capital inflows to sustain an inflated market.

    http://aaronlayman.com/2015/06/katy-texas-west-houston-real-estate-market-may-2015/

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