The mortgage and finance industry will have a heavy spotlight from the government looking to find blame for the meltdown in the housing industry. There are culprits in almost every area of the industry. Two leading fund managers with Bear Stearns were iarrested last week accuses of misleading investors to lose billions with a failing mortgage fund. On a local level the FBI announced they have arrested over 400 individuals in the past week in connection with mortgage lending fraud. There are likely to be hundreds if not thousands of more people who could face criminal sanctions for participating in illegal mortgage activities.

A majority of mortgage related fraud involves more than one party as it would be necessary to carry the fraud through. There is almost always a lender, borrower and appraiser who are working in collusion to falsify loan documents. The biggest area of loan fraud is generally dealing with the home appraisal. Inflated appraised values allow for collateral to be exchanged for cash. There have been documented cases of homes being appraised at two and three times their actual home value. When the end investor is forced to foreclose on a property with mortgage liens that are three times the homes value fraud questions immediately become an issue.

6-21-2008 ©LowRateMortgage.com

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