Mortgage fraud has played a big role in the high level of Chicago-area foreclosures.
Real estate flipping with inflated appraisals and “outright fraud” on mortgage lenders is a major factor fueling the persistently high level of foreclosure activity in the Chicago metro area, Foreclosures.com announced Friday.
The California-based investment advisory firm, which specializes in distressed property, says it has tracked foreclosure activity since 1992.
This past January, the company reportedly found 1,486 pending suit filings to start foreclosure in Chicago’s Cook County — a decrease from 1,696 the previous month and from 2,500 in November.
Although the number of filings for foreclosure starts downsized each month, they “still represented a high number in view of the strong demand for homes throughout the Chicago metro region, and the continuing economic recovery,” according to Foreclosure.com president Alexis McGee. Additionally, they were more than double those found in surrounding suburban counties — which decreased to 621 in January from 650 the prior month.
Foreclosure.com reported that in mid-2004, a ring of 20 people were arrested and convicted after skimming $4.4 million through fraudulent deals in south and southwest Chicago.
“Property flipping through inflated appraisals and phony loan documents leads to people winding up owing much more than their homes are worth,” McGee said. “At the first sign of financial trouble, they just walk away, and the lender forecloses and takes a loss.”
According to the executive, “unsophisticated” homeowners in default don’t know about options available to avoid foreclosure.
