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Sometimes it’s good to not be in the top 10

By: 14 May 2011 One Comment

While Arkansans do and should love the attention that comes with placing near the top in a slew of highly-visible national lists, there’s one on which the Natural State doesn’t appear and thank goodness – top 10 states for mortgage fraud.

The LexisNexis Mortgage Asset Research Institute released its 13th Periodic Mortgage Case Fraud Report this month. The state that tops that list is Florida, which has ranked first for reported incidents of mortgage fraud since 2006. Florida was followed on the dubious list by New York, California, New Jersey, Maryland, Michigan, Virginia, Ohio, Colorado and Illinois.

What does the fact Arkansas didn’t make the cut when the top 10 states for mortgage fraud list was compiled mean? Hopefully, it means that lenders are doing their jobs in this state and engaging in sound mortgage practices. Here’s the thing about mortgage fraud – it hurts the real estate industry, costs taxpayers money and forces lenders to come up with stricter requirements to make sure that people are doing things the right way.

In short, a few bad apples spoil the bunch when it comes to mortgage fraud and it appears that we’ve got fewer of those apples in Arkansas than in other states. That’s good news.

That’s particularly good news when one considers that the LexisNexis report states there were 70,472 mortgage fraud suspicious activity reports filed last year – an increase of five percent over the number of filings in 2009.

The report estimates mortgage fraud resulted in losses of $1.5 billion last year due to outright fraud, misrepresentation and a number of unsavory practices. What are some of those practices? Fraud encompasses a lot of activity, but some examples might clarify the issue. A lender might pressure an appraiser to alter the fair market value of an appraisal for the sake of securing a mortgage or a borrower could purposefully misstate his income on an application. A lender might hold onto a note after a mortgage is sold on the secondary market so investors have trouble taking a bad loan to foreclosure. Perhaps a broker is actively soliciting deflated valuations of distressed homes so that buyers can snap them up and sell them for a profit.

Mortgage fraud was a contributing factor to the death of the subprime market in 2007 and the foreclosures that resulted. Furthermore, fraud has caused lenders and government regulators to crack down on fraud by tightening credit requirements – a move that might root out some fraud and could also keep some people who could handle a mortgage from getting one.

Mortgage fraud hurts buyers, sellers, lenders, real estate agents, taxpayers and just about everyone connected to the housing industry. At the very least it’s good to know that Arkansas is not one of the major contributors to that problem. We’ve already seen some reforms designed to curb mortgage fraud and it’s a safe bet that more are on the way.

Hopefully, we’ll see incidents of fraud decline significantly around the nation in the years to come.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

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