The prestigious award for the state with the most fraud goes to Georgia. And while no state would be proud to be near the top of this list from mortgage fraud prevention provider Mortgage Asset Research Institute (MARI), the silver state gets the silver medal.
MARIs data is collected within the MIDEX database which contains:
- Information on nonpublic incidents of alleged fraud, material misrepresentation and serious misconduct perpetrated by mortgage industry professionals. Nonpublic data is submitted to this cooperative portion of MIDEX by a wide range of companies, including national and regional lenders, mortgage insurers and secondary market agencies.
- Certain public information about administrative, enforcement and certain legal actions taken by more than 160 entities that oversee professionals in the mortgage, real estate, appraisal, commercial banking and securities industries.
Over the past several years, MARI has analyzed the alleged fraud contributions within the nonpublic portion of MIDEX. Review of total alleged fraud cases per state or geographic area alone does not adequately capture how pervasive fraud may be in that area. MARI analyzes cases in the nonpublic portion of the database relative to that area’s overall population. This analysis presents a more reliable measure of magnitude of alleged fraud activity.
MARIs most recent analysis is dated 09/15/04. Removing the District of Columbia, in order of ranking of MIDEX alleged fraud submissions as compared to population for that state are:
Fraud By State Ranking
9/15/04
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1. Georgia |
6. Colorado |
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*source: MARI
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Compared to our March analysis, Georgia moved up to the #1 spot, reflecting the significantly increased levels of mortgage fraud activity in both Fulton and Dekalb counties. Nevada fraud problems have increased as well as fraud schemes in and around the Las Vegas area have been uncovered and reported to MARI.
Mortgage Fraud Alert System (MFAS)
MARI operates MFAS which acts as an early warning fraud alert tool for the mortgage industry. MFAS subscribers receive email alerts which highlight incidents of fraud or geographic areas which are reporting high incidents of fraudulent activity. The alert information is provided to MARI by the subscribers, and MARI sends the email alerts on a “blind” basis, meaning the subscribers are unaware which company submitted the alert.
A sample of an MFAS alert issued in August follows.
The following is a new alert from the Mortgage Fraud Alert System (MFAS):
Appraisals were performed on a total of seventy-four (74) investment properties that were mainly concentrated in Wayne Township in Fort Wayne, Indiana. The bulk of these appraisals (58) were for the same four (4) individual investors. The incident date range of activity was 04/01/2003 – 12/31/2003.
The appraisal reports were completed for investment properties, and, in most cases (approximately 54 of the 74 reports), contained inaccurate information pertaining to tenant occupancy issues, rehab issues, and excessive value issues.
The following were used to determine misrepresentation: drive-by appraisal, broker’s price opinion.
The comparables listed were superior in quality and/or size to the subject property. The comparables listed were farther than appropriate from the subject property; closer comparable sales were available, but not utilized.
The properties had prior sales that were not disclosed. The owner as listed did not actually own the property at the time of valuation. Improvements were listed that had not actually been made.
BPO (Broker Price Opinion) appraisal reports were completed on all seventy-four (74) properties. The total appraised value as reported on the appraisal reports was $3,865,000, while the total appraised value as reported on the BPOs was $2,352,000. This is reflecting a difference of $1,513,000.
Retrospective appraisals were also completed on all seventy-four (74) properties. These additional retrospective appraisal reports reflect numerous additional concerns such as the following, but not limited to:
a) Incorrect photos of properties.
b) Incorrect sketches of properties.
c) Incorrect owners listed.
d) Prior sales not disclosed.
e) Excessive/questionable values.
f) Incorrect properties being appraised.
Since 1990, MARI has provided risk management data to the mortgage industry. MARIs data is used to:
- perform initial background checks on individuals or firms with whom they have a pending business transaction
- periodically assess all real estate or mortgage professionals with whom they contract business
execute quality control investigations on any loans containing inconsistent information
