Mortgage Fraud - It Isn't Going Away
Suppose a politicial jurisdiction, maybe a city or a county, has an obligation to inspect and certify that land has been properly prepared for residential or commercial construction. That jurisdiction's certification becomes an assurance to lenders that foundations and porches won't crumble and that sewer and water lines were installed according to applicable codes so they won't leak. And what if that same jurisdiction has an obligation to make similar certification inspections of structures to assure compliance with other applicable codes?
Lenders, their appraisers, and property buyers alike rely on those certifying inspections by the jurisdiction's inspectors, because once the dirt has been compacted or thrown in the trench, it's may be months or years before the consequences of substandard workmanship certified by deficient inspections ooze to the surface.
The same lenders, appraisers, and buyers rely on the jurisdiction's building inspections to ensure there really is a vapor seal under that siding, that structural, plumbing, and electrical work is safe and code-compliant, and that an array of other hidden work has been done as promised.
What if the jurisdiction didn't have enough inspectors to handle the additional inspections associated with the area's construction boom? Instead of aggravating developers and builders by insisting on conducting diligent compliance inspections, what if the jurisdiction's officials told its inspectors to only do a few occasional field inspections and then just sign off on the rest as if inspections had really been done? Wouldn't that be misleading?
It would not only be misleading, it would quite likely be criminal. Misrepresenting to lenders, appraisers, and buyers that property meets a promised standard of safety and quality when it does not results in the property being valued higher than justified. The property with the artificially inflated valuation receives a mortgage loan higher than it should, and that puts the lender and property owner at risk. That is mortgage fraud.
Whether the housing and commercial market is hot or cold, mortgage fraud still exists.
Today's New York Times has an article about it. The article by Julie Creswell is titled Mortgage fraud is up, but not in their back yards. The story talks about Atlanta's "All-Broad Fraud Squad", ladies who endured the put-downs from law enforcement and mortgage lenders alike to expose and educate about mortgage fraud in Atlanta.
Just after the first of the year, Whitecaps did a series of posts relating to mortgage fraud. Here's links to them:
Lenders, their appraisers, and property buyers alike rely on those certifying inspections by the jurisdiction's inspectors, because once the dirt has been compacted or thrown in the trench, it's may be months or years before the consequences of substandard workmanship certified by deficient inspections ooze to the surface.
The same lenders, appraisers, and buyers rely on the jurisdiction's building inspections to ensure there really is a vapor seal under that siding, that structural, plumbing, and electrical work is safe and code-compliant, and that an array of other hidden work has been done as promised.
What if the jurisdiction didn't have enough inspectors to handle the additional inspections associated with the area's construction boom? Instead of aggravating developers and builders by insisting on conducting diligent compliance inspections, what if the jurisdiction's officials told its inspectors to only do a few occasional field inspections and then just sign off on the rest as if inspections had really been done? Wouldn't that be misleading?
It would not only be misleading, it would quite likely be criminal. Misrepresenting to lenders, appraisers, and buyers that property meets a promised standard of safety and quality when it does not results in the property being valued higher than justified. The property with the artificially inflated valuation receives a mortgage loan higher than it should, and that puts the lender and property owner at risk. That is mortgage fraud.
Whether the housing and commercial market is hot or cold, mortgage fraud still exists.
Today's New York Times has an article about it. The article by Julie Creswell is titled Mortgage fraud is up, but not in their back yards. The story talks about Atlanta's "All-Broad Fraud Squad", ladies who endured the put-downs from law enforcement and mortgage lenders alike to expose and educate about mortgage fraud in Atlanta.
Just after the first of the year, Whitecaps did a series of posts relating to mortgage fraud. Here's links to them:
- Mortgage Loan Fraud
- Appraisal Fraud in Real Estate
- The President's Corporate Fraud Task Force
- Bank Examiner! Halt or I'll Put On My Green Eyeshade!
- FBI Financial Crime Report for 2006
As the residential and commercial construction market begins to cool, there will be less news coverage about mortgage fraud. The absence of news coverage doesn't mean mortgage fraud is going away. It isn't. Honest lenders, appraisers, and buyers need to be as vigilant as ever. And they need to be as persistent as Atlanta's All-Broad Fraud Squad.
posted by Bill McCrory | 7:35 AM
2 Comments:
Who's on the line here? Say, for example, in Excellent City there is a building boom and there just aren't enough inspectors to certifify that Moonshine Meadows is adhering to standards. Can a homeowner sue the developer, the city, the lender, the title company, all of 'em? Especially here in North Idaho, where accountability in government is about as common as cactus, how could a ripped-off homeowner recover what's theirs?
DanG,
Thank you for asking good questions.
One of the first things a victimized business or residential property owner should do is talk to a good attorney conversant with both land use and construction law. Every situation is likely to be factually different. As tempting as it will be to want to see people go to jail, a property owner has to first protect his own financial investment.
If I were in that situation, I would never meet with or talk with anyone representing the developer, the city or county, or the builders. I'd leave all those meetings and discussions up to my attorney.
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