Florida Senate Sends Tougher Mortgage Fraud Bill to Governor Charlie Crist

April 30, 2008 – Palm Coast, FL – Mortgage fraud could result in up to 15 years in prison if Florida Governor Charlie Crist signs a bill passed by the state Senate on Tuesday. The new measure would raise the penalty for involvement in a mortgage fraud scheme from a third-degree felony to a second-degree felony if the loan is for more than $100,000. According to a legislative analysis, between 70 and 80 percent of Florida’s 700,000 foreclosures last year were the result of mortgage fraud.

 

Mortgage fraud hurts many people beyond the lenders and borrowers caught up in the scheme. Entire neighborhoods can be affected. When the price of a home is inflated in order to obtain a fraudulent mortgage, it effects the appraisals of neighboring homes, potentially raising their assessments and taxes. It also disrupts the practice of using comparable pricing (comps) to appraise homes for loan value or to determine proper listing prices, affecting the real estate industry as a whole. Entire neighborhoods can be devastated by run down property and foreclosure related sales.

 

Under the new bill, law enforcement agencies will be required to promptly notify the county property appraisers when the agency finds probable cause that fraud could have artificially inflated the value of a property. Based on a conviction, the property appraiser would have the ability to reassess all affected properties.

 

Florida led the nation in mortgage fraud in 2006 and 2007 according to the Mortgage Asset Research Institute in its report to the Mortgage Bankers Association. Following Florida were Nevada, Michigan, California, Utah, Georgia, Virginia, Illinois, New York, and Minnesota. The most common types of fraud found in loans originated in 2007 involved misrepresentation of employment history or income. Another common fraud involves inflating the selling price of a home to support a larger mortgage, with the excess funds being siphoned off by the perpetrators.

 

Some frauds involve several people; real estate agents, brokers,  appraisers, loan originators, title companies, and lenders. This creates a difficult situation for law enforcement and oversight. No single state agency has authority over all the fraud participants. Real estate transactions, with their extensive paperwork, make mortgage frauds investigations complicated and time intensive. Add to that the enormous weight of the increased number of frauds and you have a recipe for disaster. Susan Taylor Martin, Senior Correspondent with the St. Petersburg Times, nails the problem in an excellent article found on TampaBay.com entitled "So Many Florida Housing Scams, So Few Watchdogs."