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Mortgage Fraud on the Rise According to FBI

According to recent announcements by the FBI, mortgage fraud is at unprecedented levels. This is somewhat of a surprise as mortgage fraud seemed to peak during the housing boom when home prices were skyrocketing and every bank was giving out mortgages to anyone regardless of their ability to pay. However, according to the FBI, there were 530 people charged with federal mortgage fraud related crimes over the past year, and more than 73,000 people were victimized by mortgage fraud for a total of approximately $1 billion.

In the time period after the housing bubble, mortgage fraud is apparently taking on a different form. These days, people are defrauding homeowners by promising them that they can avoid foreclosure by paying a fee and having their mortgage transferred to a different entity. Once the fee is paid, the people committing the fraud disappear, and the homeowner is left with the same mortgage and foreclosure risk plus the loss of the fraudulent fee that was paid.

To address this problem, the FBI is issuing public service announcements to warn people of loan modification advertisements and shady offers to avoid foreclosure. Of course, along with the public service announcements, we expect that the FBI and other law enforcement agencies will continue to make a significant number of arrests for mortgage fraud since it is a highly publicized issue these days. When the government makes an effort to focus on a specific crime, particularly when there may be a fine line between legitimate business practices and criminal activity, the government may include innocent people in the wide net they cast to attack the problem.