Making the first entry today, this series of continual excerpts from a legal paper written by Ralph Behr himself will delve into the court system and its prosecution of mortgage fraud in Florida. Mr. Behr took copious amounts of time and effort to research the topic and provided the following to share online to readers who have the time to read it. Enjoy.
a. Why is Florida the ‘epicenter’ of Prosecutions and Investigations?
Statistically, Florida is number one for reported incidences of mortgage fraud and moreover also accounts for twenty-one percent of the overall nation wide occurrences.1 “Florida also has noticeably higher percentages than the other states in: asset and debt misrepresentation on the loan application; Verification of Employment (VOE) fraud; appraisal misrepresentation; and escrow and closing document misrepresentation.”2 The south Florida areas of Miami-Dade and Broward Counties, also known as The Miami Metropolitan Statistical Area (MSA), rank first in reports of mortgage fraud.3 Consequently, because Florida, in particular the more populated areas of south Florida are responsible for the bulk of reported incidences, Florida has become the epicenter of mortgage fraud investigations and prosecutions.
b. Statistics on Mortgage Failures
II. MORTGAGE FRAUD DEFINED
Although there is no agreed definition mortgage fraud, it can be defined as a material misrepresentation or omission which is intended to induce a person or entity to extend credit to another person or entity. However, the Federal Bureau of Investigation (FBI) defines mortgage fraud “…as an intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.”4 According to the FBI there are two different types of mortgage fraud: (1) Fraud for Profit, and (2) Fraud for Housing.5 “Fraud for Profit is sometimes referred to as Industry Insider Fraud and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties.”6 On the other hand, Fraud for Housing is personified by unlawful activity conducted exclusively by a borrower.7 In regards to Fraud for Profit, the FBI has even constructed a laundry list of indicators of mortgage fraud as well as various categorical patterns that may qualify as Fraud for Profit.8
Even though the FBI may only identify two (2) types of mortgage fraud, it and other regulatory agencies are charged with monitoring and focusing on the multiple indicators and categorical patterns of fraudulent mortgage transactions of Fraud for Profit.9 The Department of Housing and Urban Development (HUD)10 puts forth the majority of their regulatory power on industry insiders who conduct Fraud for Profit operations.11 Specifically, a Financial Crimes Enforcement Network report indicates accountants, mortgage brokers, and lenders are the most likely suspects of mortgage fraud.12 These persons are considered to be “…familiar with the mortgage loan process and therefore know how to exploit vulnerabilities in the system.”13 Common designs of these targeted occupations are considered to have the potential to dramatically increase in numbers as a direct result of the downward trend in the housing market.14
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South Florida Mortgage Fraud Prosecutions: Part 1