We’re all perfectly aware that mortgage companies caused the sub-prime meltdown all by themselves. They sent armies of loan officers out into their communities, located unqualified people who had no intention of owning a home, held them down and twisted their arms until they signed on the dotted line. As most readers will be able to detect, despite relentless rumors to the contrary, the preceding sequence of events has never been proven to have actually happened even once. Not to detract from the grievous mistakes, stupidity and outright criminal behavior on the part of America’s lending institutions, it should not escape out notice that there are two sides to a mortgage fraud.

One is the out-of-control lender making no effort to verify that income and assets claimed on a loan application actually existed, so caught up were they in the prospect that property values had been increasing for the longest time and another hefty commission sure would be nice. Call it stupid, criminal, or criminally stupid; lenders, obviously, were making loans not grounded in reality.

But on the the other side of the equation, the one which has received substantially less publicity, lie the hundred and thousands of loan applicants who falsified information, committing mortgage fraud by making it appear that they were a better risk than their financial reality would have shown. Common areas of material misrepresentation were income, assets owned, and job types. We can point to actual statistics that verify this trend continues today by examining quarterly reports from the Mortgage Asset Research Institute (MARI) which examines data collected and published by the Mortgage Industry Data Exchange Index, a compilation of fraud reports from participating lenders around the country.

As a voluntary database, the true numbers of mortgage fraud perpetrated by consumers cannot be exactly stated but states like Florida, California, Illinois, Maryland and Michigan lead the way, and the numbers do not seem to be decreasing, even as the well-publicized foreclosure mess continues to unravel its way through the economy.

Greed and desperation – a dangerous combination.

The AIPIS Team

Flickr / jarnocan