Mortgage Fraud Special Prosecutor Could Fix Large Problem

Starting what could be a national trend, Utah may soon create the office of a special prosecutor to handle mortgage fraud. As real estate sales have escalated during the last five years, reaping record profits for lenders and record equity for homeowners, crime within the industry has increased to exorbitant levels. 

Mortgage fraud is a blanket name given to a number of different illegal tactics employed by criminals working within and without the lending industry.

 The most common examples of fraud involve cooperation between a mortgage company employee and an appraiser, where the appraiser agrees to declare the value of a property to be more than it is really worth. With that fraudulent appraisal, the lender can issue a loan for more than the home is actually worth.

Sometimes, the crime is a fairly small one, as it may be as simple as bumping the value of a home a few thousand dollars in order to equal the seller’s asking price. While far from harmless, this happens every day and few people seem to be bothered by it. On the other hand, the current boom of fraud in the industry usually involves cooperation between a number of parties who arrange for a house to sell for two, three or even five times it’s actual value. Some properties have been known to sell two or even three times in a single day. In these cases, the buyers are often investors from out of state who don’t know what they are buying, or the schemes involve a “straw man” who may be providing his or her own good credit but may not be aware of the crime involved.

The bulk of this fraud has been going on in the Southeast, with Atlanta being the mortgage fraud capitol of the United States. Oddly enough, Utah ranks in the top five states for this crime, and that is what has prompted one legislator to promote the creation of a special prosecutor for mortgage crimes.

Utah has a population of mostly law-abiding citizens who can sometimes be a bit naive when it comes to financial transactions. Most of the citizens of Utah are at least nominal members of the Church of Jesus Christ of Latter-Day Saints, an organization that puts a lot of trust in other church members. If a member of the church is approached for a financial deal by another church member, he or she will often go along with it without asking questions, simply because of the implied trust in the relationship between church members. Often, after being swindled, the victim can be heard to exclaim, “But he was a member of my church!”

Utah has long been a hotbed for financial scandals of all sorts, and perhaps the creation of a special prosecutor for home lending scams will not only put a damper on lending crime in Utah, but may also begin the process of clamping down on such fraud nationwide.