Among clichés about the crime of fraud, the one about selling swamp land in Florida is one of the most enduring examples. It refers, on its face, to a type of real-estate scam in which someone is offered a supposedly can’t-miss investment opportunity.
Real-life mortgage fraud is often quite different than this caricatured scenario would suggest.
As we discussed in our recent article on mortgage fraud in Florida, there are numerous types of fraud that go by this name.
For example, one of the most common types of mortgage fraud has historically involved using fraudulent information in applications for mortgage loans. In other words, borrowers use false information to obtain mortgage loans, even though they don’t qualify for those loans under the underwriting standards.
This type of mortgage fraud may be less likely to occur now than it was a few years ago. That is because banks and other lenders have tightened underwriting standards considerably in the wake of the real estate crisis and the financial crisis that followed it.
Those twin crises – the real estate crisis and the financial crisis – were in turn followed by the Great Recession. It was no ordinary recession; it was the biggest economic downturn since the Great Depression of the 1930s.
Not surprisingly, the Great Recession had a major impact on mortgage fraud cases. The most common cases now often involve transactions in which there is economic distress, such as foreclosure rescue or mortgage modification schemes.
As we noted in our article, mortgage fraud schemes like this frequently target homeowners who are risk of losing their homes. Many schemes try to get homeowners to pay an up-front fee, without any way of knowing that the person or company taking the money will actually do anything to help.