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An American Epidemic...Mortgage Fraud a Serious Business

(EMAILWIRE.COM, November 11, 2006 ) Dallas, Texas - “An American Epidemic”, consider that phrase for a moment. Epidemic may sound like a strong word to you, but after considering the latest figures on real estate fraud it is my sincere belief that the word is, in fact, not quite strong enough! Learn how to prevent mortgage and real estate fraud, by reading “An American Epidemic…Mortgage Fraud a Serious Business, by Michael S. Richardson the Managing Director of According to the FBI’s May 2005 Financial Crimes Report to the Public, the number of mortgage fraud reports filed has escalated nearly 150% since 2003. The report also showed that 80% of the cases involve either overstated property appraisals or non-existent properties. Mortgage Fraud statistics point to nothing short of an epidemic. And yet, really, what do we know about fraud? In point of fact, it’s not what we know about fraud that’s dangerous; it’s what we don’t know. What’s worse is the staggering amount of opportunity with which the American real estate mortgage industry provides those who commit fraud. According to the Mortgage Bankers of America, or MBA, their 2005 Mortgage Originations Forecast estimates some $2,738,000,000,000 (that extra trio of zeroes isn’t a typo; that’s over 2.7 trillion dollars!) in new loans. This staggering number includes about 20 million in new mortgages required to cover new and existing home sales. Those are big numbers, and now even the MBA is including the likelihood of fraud in their statistics, estimating that 10% to15% of mortgage loans have some kind of fraud involved. This means that between 2 to 3 million home loans originated this year could be fraudulent; that equates to over 7,500 new fraudulent loans every business day.Now, that is an epidemic…Who benefits from such fraud? By my own calculations based on such industry standards, loan officers and others in the mortgage transaction accounted for roughly $8 billion in loan fees and commissions for fraudulent closed loans while real estate agents and real estate companies themselves raked in over $13 billion in commissions from those fraudulent transactions.The statistics on fraud may be sobering, but what’s worse is the sparse amount of stop-gap measures currently in place to prevent this all too common felony. Many of us come to the industry by way of other careers. With the real estate bubble growing exponentially, and the resulting refinance craze declining with rising interest rates, it is not uncommon for us to be working alongside relative newcomers from diverse careers.Clearly, the amount of money to be made in real estate – both residential and commercial – lends itself to abuse. New employees mean new training, and lack of new training leads to old mistakes. The growth of fraud is insidious; it creeps up on us, taking us by surprise until, before we know it, someone we work with, someone we work for, or even those who work for us, is committing fraud.It’s so easy, so slick, and until now so largely un-enforced. A number fudged there, a figure left out here, a bogus appraisal, a friend of a friend who plays it fast and loose with a client’s verification of rent and a newly scrubbed credit report, and soon enough a mortgage loan is approved, “clear to close,” but is in fact fraudulent. Once a white-collar criminal gets away with it, the process quickly becomes addictive. Success breeds more success, and before long such crafters of fraudulent mortgage loans clearly begin feeling that not only are they above the law but, in fact, they aren’t doing anything wrong in the first place.But those of us who take our profession seriously, who are in this business to help sincere, hardworking, law-abiding citizens obtain housing in a fair market for a mortgage that works for them can think of little worse than those who prey on the innocent, the righteous, the unsophisticated and the trusting.Fraud can happen to anyone: employees, buyers, sellers, investors, and owners. It can happen anywhere: big cities, small towns, storied and well-recognized firms and smaller mom and pop businesses who just want to do the right thing. So, who still thinks “epidemic” is too harsh a word?!?Don’t let the statistics get you down: according to the Mortgage Bankers Association of America, “…the U.S. Attorney and others have suggested that as much as 70-80 percent of mortgage fraud can be avoided through aggressive fraud awareness and detection efforts.”That’s where I come in: being recently appointed the Managing Director of as a specialist in preventing mortgage fraud, as well as my personal experiences with mortgage fraud, have given me a doctoral degree from the school of hard knocks. Much like you, I “never thought it could happen to me.”But it did.It can.And if the statistics prove out, it probably will…But it doesn’t have to. Not to you, anyway. And not to those you do business with, not if you obtain all the tools you’ll need to prevent yourself from becoming a victim of this increasingly common crime. About the Author: Michael S. Richardson speaks from experience. As previous president of his own mortgage and real estate companies, he discovered that one of his long-time, trusted employees was committing fraud right under his nose. Michael has been an entrepreneur since 1980 and successfully started and sold 7 businesses. He has been a loan officer, real estate agent and mortgage company owner. He has been a member of NAMB and MBA; has previously served on the Advisory Board of Fannie Mae Colorado Partnership Office; Colorado Housing Council; Colorado Mortgage Lenders Association; Commissioner of a Housing Authority Board, the Board of Realtors® and won the HUD Best Practices Award. You can learn more about Michael and the various services and products he offers at his website: Headquartered in Denver, Co. is a leading educator of real estate fraud prevention solutions in the United States. Homeowners, Mortgage and Real Estate transaction clients nationally have benefited from their on suite of educational and fraud prevention services. The company's core offerings include the book “An American Epidemic, Mortgage Fraud a Serious Business”. “Focus on Fraud” workshops are for loan officers, real estate agents, title professionals, and operational staff and compliance personnel. Our “Clear to Close” service is a loan pre-funding audit. “Expert Support Services” which includes a forensic loan file review and Mortgage Fraud Opinion Review on mortgage fraud files and prepares a package for management decision on how to move the fraud case to the next level, civilly criminally or both. For additional information visit, or contact at 303-238-6200. Contact: Michael S.
Michael Richardson


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