Flipping Tied to Mortgage Fraud Cases by Jim Woodard on Creators.com

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Flipping Tied to Mortgage Fraud Cases

In recent months, real estate investors and investment companies have been involved in a disproportionately high percentage of suspicious mortgage applications. Home sale flipping — buying residential properties for quick resale and profit — has been involved in many of these transactions.

Flipping hot spots nationwide are Southern California, Phoenix, Detroit and Atlanta, but the practice is taking place in all regions of the country. Lenders have reported that occupancy fraud, employment fraud and undisclosed debt are on the rise in many of these mortgage applications.

Mortgage fraud increased by more than 20 percent since the fraud rates reached their lowest point in early 2009, according to CoreLogic's 2010 Mortgage Fraud Trends Report, proving that no matter how strict the lending requirements, people will always find a way to take advantage of the system.

During the seven quarters CoreLogic has been analyzing the mortgage market, fraud risk associated with refinancing grew approximately 30 percent. The recent study also found that REO sales (real estate owned by banks) pose a greater risk than short sales, with one in every 24 REO sale transactions associated with a fraudulent resale.

Increased lending through FHA and HARP (Home Affordability Refinance Program) loans accounted for most of the increased risk in 2009 and 2010. The second quarter of 2010 had the highest volume of single-family home short sales with nearly 60,000 short-sale transactions. REO transaction volume is more than twice that of short sales, with 120,000 REO sales in the second quarter of 2010.

"Despite increased fraud activity during 2010, the industry has made substantial progress in curbing fraud from the levels it reached during the height of the market in 2007. Fraud continues to shift to areas of the lending business where large volume increases occur over short periods of time, or where advanced risk mitigation processes are not squarely in place," said Tim Grace, senior vice president of Fraud Solutions at CoreLogic.

Q: Are home prices stabilizing?

A: Current indicators point to stabilization in house prices and high home affordability due in part to record low mortgage interest rates, according to the Department of Housing and Urban Development (HUD) and the Department of the Treasury.

An additional 1 million families refinanced their mortgages in the past quarter, taking advantage of the lowest rates in history on 30-year fixed mortgages, the report noted.

Since April 2009, record low interest rates have helped more than 8.3 million homeowners to refinance, resulting in more stable home prices and $15.2 billion in annual borrower savings.

Also, as expected with the expiration of the Homebuyer Tax Credit, new and existing home sales have remained below levels seen in the first half of 2010. At the same time, home prices remained level in the past year after 33 straight months of decline, and homeowners added $95 billion in home equity in the second quarter.

Q: Is there a homes-for-sale website that reaches out to the international market?

A: The National Association of Realtors announced that Realtor.com, NAR's official website, will soon be going global, extending its lead as the world's largest online source of residential property listings.

Realtor.com, a major homes-for-sale website, will add translation services and increase its presence in international markets to attract even more international visitors to U.S. listings. More than 575,000 consumers from non-U.S. destinations currently visit Realtor.com each month, it was reported.

"Realtor.com will expand the exposure of U.S. real estate listings to global markets and add international listings," said NAR President Ron Phipps.

"While all real estate in the U.S. is local, the same is not true for property owners. The U.S. continues to be a top destination for international buyers from all over the world. Foreign buyers understand the value of owning a home in this country," Phipps said.

NAR will work with Move Inc., operator of Realtor.com, to add features to Realtor.com, making it easier for international consumers to search for listings in their language and through personalized views, according to NAR.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.