Mortgage Fraud and Bank Crackdowns
It’s been an interesting morning in terms of the mortgage market and the financial market. Two very interesting trends are emerging: increased mortgage fraud and increased crackdowns on banks.
Mortgage fraud on the rise
Mortgage fraud is actually on the rise. According to the Wall Street Journal, the year over year rate of mortgage fraud is up 42%. That’s right, after everything we’ve learned about lending practices in the last year, mortgage fraud is still alive and well — specifically the brand in which borrowers inflate their assets in order to qualify for a home mortgage loan. And some banks are still going along with it.
Of course, I can see the attraction. With tighter lending standards overall in the mortgage industry, and the difficulty of getting a bad credit home mortgage loan increasing, it isn’t hard to see why some are inflating their incomes. And with home mortgage loan borrowers harder to approve, it is understandable that mortgage lenders and loan officers are willing to let some of the documentation slide.
On the other hand, this increase in mortgage fraud may actually be proof that banks are starting to crackdown on fraud, and are now properly reporting instanced of mortgage fraud.
Bank crackdowns
Bank regulators are showing their concern for the health of the financial sector, specifically banks. With the ninth bank failing this year, regulators are increasing the number of banks they put on probation. The probationary status is meant as a catalyst to encourage banks to change their practices so that they can avoid failure. The idea is that if the banks do not comply, they will be faced with closure and be taken over by the FDIC — a costly process for the bank.
With all of the news coming out, it meant that it might be a while before the mortgage market gets back on track.
Tags: mortgage market, bank failures, home mortgage loan, FDIC,
mortgage lenders, mortgage fraud, banks probation
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