New Mortgage Loans Declining, but Fraud Still on the Rise
A surprising study by the Mortgage Asset Research Institute has revealed that while the number of new mortgages originated has declined significantly over the past couple of years, the incidence of fraud by loan officers is still on the rise. The general consensus has been that the majority of the dishonest lenders and brokers and washed out of the industry in the recent decline, either taking their money and getting out as the tide started to turn or getting caught up in the wave of layoffs and corporate bankruptcies among exotic mortgage lenders.
Now, the New York Times is reporting that there appear to be more bad apples left than previously suspected. In fact, in the second quarter of 2008, fraud by loan officers was up 45% over the previous year. While one analyst has suggested that some of these fraudulent activities might actually have occurred earlier, but not come to light until regulation began to tighten up, Jennifer Butts of the Research Institute offers another explanation: those who didn’t get weeded out have fewer transactions on which to make a profit these days, and so they’re just a little bit more desperate.
The bottom line, for consumer purposes, is clear: Don’t assume that the mortgage industry is clean now, or that regulation has made it safe to take the lender’s or broker’s word on faith.
