Mortgage fraud has been increasing globally harming homeowners, businesses and the economy. New ways to detect and prevent mortgage fraud have been developed to discover and prevent criminals before the fact; rather than after the damage has been done. The article An Insight into the World of Mortgage Fraud in the US and UK by Beverly Houlbrook talks about mortgage fraud and how it is becoming more evident “as economies enter recessionary periods and house prices tumbles” (34). It states how the global mortgage markets are providing “more opportunities for professional, innovative fraudsters to exploit and profit from loopholes and system weaknesses” (34).
Houlbrook goes on to discuss the different types of mortgage fraud ranging from soft fraud to professional mortgage fraud. Fraud for housing (a soft fraud) is when an applicant is acting alone to acquire property. In terms of volume it is the most common type of mortgage fraud based on income and employment misrepresentation on their mortgage application. Fraud for profit (a professional mortgage fraud) is when numerous borrower identities, lending institutions, “fictitious properties and overvalued professionals are involved” (34). The losses created by fraud from profit may be substantial and could lead to national and international headlines. It can also support the lifestyles of criminals by “hiding money laundering activities, arms dealing and drug trafficking” (34). Two types of fraud that is common in the US and UK is identity or house theft and occupancy fraud (buy-to-let (BLT) mortgages). House theft occurs when property is bought or financed “without the knowledge of the property owner” (35). Occupancy fraud occurs when “BLT landlords attempt to disguise buy-to-l...
... middle of paper ...
...ue to increased repossessions and fewer first time home buyers, putting the landlord in a strong position” (42).
As more economies enter recession and housing prices decline; mortgage fraud in the US and UK has been increasing causing harm to innocent homeowners, businesses and the economy. In attempt to combat mortgage fraud controls have been put into place to prevent the damage before it being done. Since mortgage fraud has increased substantially homeowners and businesses need to find a way to protect and detect when a deal is just too good for comfort. The most important way to protect yourself or business from mortgage fraud is through education learn the facts about the investment down to the smallest nuances.
Works Cited
Houlbrook, B. (2011). An Insight into the World of Mortgage Fraud in the US and UK. Housing Finance International , 25 (3), 34-42.
After the terrorist attacks of September 11, 2001 many New Yorkers and New Jerseyians were looking for a safe haven away from the turmoil of the aftermath. Many sought this refuge in the Pocono Mountains in Pennsylvania. Touting a short drive to New York City, many local home construction companies saw this as an opportunity to sell houses and turn a profit. Many of these companies were reputable and upstanding businesses that produced a quality product at a market ready price. However, some of these companies were not so upstanding and as a result many unsuspecting homeowners were scammed out of thousands of dollars and just as many ended up in foreclosure. It became very clear early on that something was not right with many of the new home transactions involving a company called Rain Tree Homes, and so the Y-Rent scam slowly unfolded.
In recent years, it seems as if there is a new financial fraud being reported any given day. One could even say that fraud has become almost a much a surety as taxes. Given the opportunities and pressures, many will businesses will fall victim to human natures and suffer losses through fraudulent activities. This case study will follow one such fraud, following the crimes of Terry Scott Welch in his pursuit for happiness by indulging his passion of landscaping.
Weld, L. G., Bergevin, P. M., & Magrath, L. (2004). Anatomy of a financial fraud. The CPA
Hanson, J. R. (n.d.). Fraud or confusion? RDH Magazine, 19(4). Retrieved 3 15, 2014, from http://www.rdhmag.com/articles/print/volume-19/issue-4/feature/fraud-or-confusion.html
Sase, J. F., and Gerard Senick. Another Mortgage Tsunami? “Let Them Eat Cake” (Part Two). 2010. Print.
landlords lose so much money that they are not able to even pay the debt on the
Leading up to the crisis of the housing market, borrowers got mortgages without understanding the terms. Banks were giving out loans to people the banks weren't sure could pay the money back. The closer to the crisis, the higher the frequency of illegitimate loans and mortgages. Because there were so many mortgages on houses that could not be paid back, millions of mortgages were foreclosed on, and the houses we...
A majority of mortgage defaults that Americans used were on subprime mortgage loans, which were high-interest-rate loans lent to people with high risk credit rates (Brue). Despite knowing the risks, the Federal government encouraged major banks to lend out these loans to buyers, in hopes, of broadening ho...
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
The Sub-Prime Mortgage Crisis of 2008 has been the largest financial crisis to take place since the end of the Great Depression. It was the actions of individuals and companies that caused this crisis. For although it could have been adverted, too much money was being made by too many people in place of authority to think deeply on the situation. As such, by the time actions were taken to attempt to rectify the situation, it was already too late. Trillions of dollar of tax payers’ money was spent trying to repair the situation that was caused by the breakdown of ethics and accountability in the private sector. And despite the government’s actions to attempt to contain the crisis, hundreds of thousands lives were negatively affected before, during, and after this crisis.
Mortgage loans are a substantial form of revenue for the financial industry. Mortgage loans generate billions of dollars in the financial industry. It is no secret that companies have the ability to make a lot of money by offering a variety of mortgage loan products. The problem was not mortgage loans but that mortgage companies were using unethical behavior to get consumer mortgage loans approved. Unfortunately, the Countrywide Financial case was not an isolated case. Many top name mortgage companies have been guilty of unethical behavior. Just as the American housing market was starting to recover from its worst battering since the Great Depression, a new scandal, an epidemic of flawed or fraudulent mortgage documents, threatens to send not just the housing market but the entire economy back into a tailspin (Nation, 2010).
result from the withdrawal of the federal government’s investment in affordable housing. It has been noted that
When someone makes the decision to buy or rent a home they must consider the advantages and disadvantages of each. In buying a home the primary advantage is that you actually own it. You can do whatever you want with it. Also, you are building equity as the years go by. “People today have problems saving for their future” (CNN Money, 2014). However, when they buy a home, the money they put down for a down payment is an investment. When the person sells the home they get back the down payment and the amount the property has appreciated in value. When looking at the advantages of renting it is easy to see the disadvantages of buying for some people. Even though you don’t get the money back that you put into it, renting could be a more satisfying option for some. This is because renting allows for flexibility. The person can move wherever as soon as there lease is up. Renters may see buying as “a reduction in lifestyle, moving to a smaller place, and perhaps a less expensive neighborhood.” (CNN Money, 2014). For example someone who rents an apartment enjoys how the complex keeps up the area and all the amenities it has to offer, and it is in an upper class part of town. However, when they buy they looks all the benefits, they have to do maintenance themselves, and move to an area they don’t particularly like to fit their price range.
Eight years ago, the world economy crashed. Jobs were lost, families misplaced, hundreds of thousands of people left shocked and confused as they watched the security of their world fall to pieces around them. In, “The Big Short,” a film directed by Adam McKay and based on the book written by Michael Lewis, viewers get an inside perspective on how the financial crisis of 2008 really happened. Viewers learn the truth about the unethical actions and irrational justifications made by those who unwittingly set the world up for failure. Two main ethically tied decisions are brought into question when watching the film: how could anyone conscionably make the decision to mislead investors by misrepresenting mortgage backed securities (MBS), and why
This is the problem with the burst in the housing market. The third major factor that is causing the mortgage crisis is, mortgage fraud.