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Florida Tops Charts Again For Mortgage Fraud

Florida once again was rated the top state for mortgage fraud, according to a report released Monday by the LexisNexis Mortgage Asset Research Institute.

Florida also held the annual report's top spot in 2006 and 2007, but was replaced in 2008 by Rhode Island. New York was in second place behind Florida in 2009, followed by California.

The Miami-Fort Lauderdale region ranked fourth among the metropolitan areas studied, institute researchers found, accounting for 4 percent of all mortgage fraud reported nationwide. The New York-New Jersey- Long Island area was first, followed by Los Angeles-Riverside and the tri-state Chicago-Gary-Kenosha region.

The report looked at incidents of alleged fraud and misrepresentation reported by lenders, agencies and insurers to the Mortgage Industry Data Exchange, or MIDEX. Researchers also analyzed 67,190 suspicious mortgage activity reports submitted last year to the U.S. Treasury Department's financial crimes division. Appraisal misrepresentation skyrocketing, but phony applications are down. Florida had almost three times the number of fraud or misrepresentation reports as what would be considered normal for the number of loans.

Analysts were particularly concerned about skyrocketing incidents of appraisal fraud nationwide, with Florida having the highest rates of this activity in the country. The most common practice was inflating, fabricating or incorrectly reporting comparables, seen in 36 percent of loans nationwide flagged for fraud.

Darius Bozorgi, CEO of Veros Real Estate Solutions, which assisted in compiling the report, blamed the poor housing market. "Florida is the No. 1 state for depreciating home prices. So it's really no surprise that Florida is the No. 1 state for fraud," he said.

This year may remain grim for Florida. The Veros VeroFORECAST report, which projects market trends over the next 12 to 18 months, recently listed the five anticipated weakest markets nationwide. All were in Florida, although none in South Florida, with the Daytona Beach area the first with a projected 10 percent drop in values.

On a brighter note, Florida and New York showed dramatic declines in mortgage application fraud from 2008 to 2009, although it remained the most common form of mortgage malfeasance.

Mortgage incident reports nationwide went up 7 percent from 2008 to 2009, the report found. The institute and Veros called on government and the mortgage industry to be increasingly vigilant, as fraudulent brokers and loan originators are using more sophisticated methods.

Florida has tightened regulations for the mortgage industry over the past two years and stepped up enforcement.

Consumers never should pay upfront for loan modifications or foreclosure rescue work, as its now illegal. And as of Jan. 1, anyone who does modifications needs to be licensed as a mortgage broker with the Florida Office of Financial Regulation.  It's time to clamp down hard on mortgage fraud as it's ruining the real estate market even more and will kee it in shambles if something isn't done soon.

To check a broker's license or make a complaint in regard to mortgage services, call 800-848-3792 or go to http://www.flofr.com

The Florida Attorney General's Office also has ongoing cases against foreclosure rescue operations. Call 866-966-7226 or go to http://www.myfloridalegal.com

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