Florida #1 in Mortgage Fraud, Florida Foreclosures Up

Two years running Florida has led the nation in mortgage fraud in 2007.

The Mortgage Bankers Association is urging Congress to set aside $31.25 million over the next five years so that they may hire more FBI investigators and prosecutors so they can investigate the number of cases of suspected mortgage fraud in relation to South Florida real estate.

According to a 2006 report released this week by a Virginia based Mortgage Asset Research Institute; Florida replaced Georgia for the number 1 spot for mortgage fraud. The group tracks loan fraud and ranks the top 10 states where lenders either have found, or suspect, problematic loans. Florida ranked fourth in last year's report.

Fallout from Florida's hot housing market is leading lenders to pick up on bad loans originated last year, experts say.

According to some economists, Florida’s #1 ranking spells trouble for more than just lenders who are forced to Florida foreclose on properties when borrowers stop making mortgage payments. Florida’s housing economy could suffer as mortgage fraud pushes up Florida foreclosure rates, which causes more homes to flood the already crowded Florida real estate market. As homeowners compete with each other and lenders, prices could go down on Florida homes for sale.

The Florida Association of Realtors released another report on Tuesday, stating the fraud report comes on the heels of another dim housing report.  Existing Florida home sales dropped more in the Tampa Bay area in the first quarter than in any other area in the state. Sales slid 37 percent, compared with the same quarter last year.

Even though the mortgage volume is the lowest since 2001, lenders, however, are reporting that 30 % more suspicious mortgage loans were made in 2006 than a year earlier. This information is based on a report release from a research firm that tracks suspicious activity reports submitted by lenders. Those reports include loans suspected in large-scale mortgage fraud schemes and borrowers who fibbed about their income on their loan application.

Contributed by MLR Realty