Fraud Thriving On Worsening Foreclosure Crisis

March 24th, 2009

Mortgage rescue fraud is thriving on worsening foreclosure crisis. It is something to be scared about. The definition of mortgage fraud reads as the intentional misstating or omitting of certain details in a loan application. According to reports from mortgage industry the banks have lost anything from $1 billion to over $2.5 billion annually because of mortgage fraud. It is also mauling communities by playing recklessly with real estate prices.

In South Florida mortgage fraud has largely been responsible for rising house prices and house taxes as the buyers paid more than the real worth of the units. The defaulting loans led to the rash of foreclosures and the melt down of the housing market. Over 4,500 houses in Broward County and Palm Beach County were at risk from foreclosure in October 2008. Loretta A. Kenna is an attorney who is dealing with many fraud cases. She said, “It’s a very, very scary state of affairs. These are people’s homes and lives we’re talking about.”

In typical foreclosure cases the perpetrator’s walk away with thousands as fees without giving any real help. In some extreme instances the cheats even convince the victims to sign over their deeds. Shawn Boehringr of Broward Legal Aid Society said that during the last 18 months calls related to foreclosure rescue frauds have increased. The agency on an average is handling 200 calls in a week. Before the foreclosure crisis hit the country in full force in 2006 the number of calls each week was 50. He said, “We see homeowners who are so desperate to save their homes, they’ll do almost anything. They don’t understand the impact of what they are signing.”

A proposal for more direct funding to tackle mortgage fraud was co-sponsored by U.S. Rep. Ron Klein in regions where the menace is rampant. Klein pointed out that in many instances in Florida, brokers with criminal records had been given license. The consumer pressing charges has good reason to seek justice. Klein explained, “Florida fell on its face when it came to this issue. For a period of years, unfortunately, there was really no regulation.” Federal prosecutors have brought charges against a minimum number of 112 persons in South Florida for mortgage fraud. The amount involved is $200 million. Eighty more cases are waiting to be investigated.

Attorney Alex Costa of South Florida strongly feels that mere prosecutions will not made a dent on the foreclosure fraud epidemic. What is needed is a change in the operations of the industry.