One indicator that the real estate market is showing signs of recovery is the levels of mortgage fraud. Unfortunately, that’s not a good thing, because mortgage fraud dropped dramatically during the Great Recession. Fewer mortgages does mean fewer opportunities for fraud, but the numbers are expressed as percentages, so it’s not a directly proportional relationship. Fraud indications increased by 37% between Q2 2020 and Q2 2021. Even with such a large jump, it’s actually not much higher than the average across the past decade.
Mortgage fraud can originate from either the lender or the borrower. Borrower fraud is relatively simple to look out for, but it’s something the lender would need to do. Lenders can look at recent job changes, especially to a higher-paying job, claims that the property is a primary residence, inconsistences in data about the property, failure to disclose debt or past foreclosures, or possible attempts to disguise parts of the transaction. These indicators aren’t a surefire guarantee of fraud, but they’re important areas to begin the search. A borrower who has had a Suspicious Activity Report (SAR) filed against them may be blocked from future mortgage loans or be required to pay off their mortgage immediately or go into foreclosure. Fraud by lenders could result in fines, loss of license, or possibly jail time.
More: https://journal.firsttuesday.us/californias-mortgage-fraud-risk-rises-in-2021/80751/