Mortgage Fraud v.2009

(MoneyWatch) 
Mortgage fraud is on the rise, especially in states where foreclosures have soared and the general economy is in the toilet.

Is it any surprise that those who lived large scamming homeowners during the boom would want to continue that standard of living now that the boom has gone bust?

Of course not. But when times change, scam artists change, too. So, I dug a little deeper into the new FBI FY2008 report on mortgage fraud. Here are some of the emerging forms of mortgage fraud, according to the FBI's latest report:

• Reverse mortgage fraud.A reverse mortgage can be a great thing for someone who is 62 years of age or older who can't afford to stay in his or her home. But reverse mortgage scammers are identifying properties that are foreclosed, distressed or abandoned. They get a straw senior buyer to purchase the property and live there for 60 days. They then arrange for a reverse mortgage (using a fraudulent appraisal, natch) to pull out the equity in the property.
• Credit enhancements.This term refers to steps people take to fraudulently boost their credit histories and credit scores, or to simply boost their credit-worthiness. This can take a number of forms, including the selling of credit histories and scores (so, non-related people will use someone else's good score to boost their own), or adding people to bank accounts to "borrow" the balance to show enough funds for a down payment or reserves. The FBI is also seeing builders depositing funds into a new home buyer's account, so that they can qualify for a loan - only to remove the funds after closing.
• Builder bailout scams - condo conversions.Builders who got caught with an excess amount of inventory sometimes would offer to sell the condos to investors in a "no risk" environment. The builders promised to find tenants for the investors, so there would be no risk of losing money. The builders claimed they would manage the building and collect rents - but didn't. The FBI also investigated cases where builders inflated the value of the condos, as well as offering incentives and upgrades that was not disclosed to lenders.
• Builder bailout scams - pump and pay. The FBI found evidence of builders who worked with "co-conspirators" to falsely inflate the value of property. The property was refinanced and the false equity redistributed to the scammers.
• Foreclosure rescue scams. How many ways can you defraud someone? The FBI found cases of foreclosure arson (where someone burned down a building to collect insurance rather than go into foreclosure), foreclosure rescue scams (where the scammer collected a "fee" to supposedly help the homeowner avoid going into foreclosure), and foreclosure bankruptcy (where the scam artist enticed the homeowner into filing for bankruptcy to stop foreclosure proceedings - and collected a big, fat fee). None of these scams permanently avoided foreclosure. They just got the homeowner into even more trouble.

The important thing to remember is that none of these scams actually work - for homeowners. The scam artists did just fine - until they were caught.

Read more:
How Many Homeowners Will Be Scammed Twice?
How Many Foreclosures Are On Your Block? You Might Be Shocked!
Photo courtesy of the FBI Mortgage Fraud 2008 Report