Mortgage Daily

Published On: October 8, 2004
Mortgage Crimes Catch Congress’s Attention

MBA testifies before House Financial Services Subcommittee

October 8, 2004


The mortgage industry climbed Capitol Hill Thursday to push for a tougher crackdown on the growing problem of fraud.The number of pending fraud cases being investigated by the FBI has grown fivefold over the last three years, from 102 in 2001 to 533 today, while Suspicious Activity Reports filed by banks has jumped from 4,200 for all of 2001 to 2,100 this year, according to Marta McCall, a senior vice president at American Mortgage Network.

McCall testified on behalf of the Mortgage Bankers Association of America before the House Financial Services Subcommittee on Housing and Community Opportunity. She said stronger law enforcement, better communication and increased innovation to identify scammers are necessary to reduce mortgage fraud.

“Today, mortgage industry leaders are extremely concerned that mortgage fraud against the lending community has grown quite large in the past several years,” McCall said, according to a written copy of her testimony, “with devastating consequences to lenders and, depending on how the fraud is perpetrated, to taxpayers, consumers and communities.”

The National Association of Mortgage Brokers (NAMB) issued a statement “applauding” Congress for its attention to the matter.

“We advocate protecting consumers through stronger enforcement of current laws and the enactment of a uniform federal lending standard that combats abusive lending and improves the overall competency of the mortgage industry.

McCall gave several examples of how mortgage fraud is costing banks, consumers and financial institutions millions of dollars a year.

There was a scheme in St. Louis involving 85 properties that netted $4.2 million in stolen money and resulted in $2.3 million in losses to lenders. Straw buyers, or individuals who were paid for the use of their names and Social Securities, helped criminals obtain fraudulent mortgages is a scheme that cost taxpayers more than $35 million.

“Fraud for profit schemes are much more far reaching and usually involve a person or groups of people who abuse the system for financial gain,” McCall said. “These criminals are often industry insiders who know how to exploit our complex system.”

Subcommittee chairman Rep. Robert W. Ney, R-Ohio, said in a statement that financial institutions lose millions of dollars a year through mortgage fraud, costs which are ultimately paid by consumers.

“Consumers are not the only ones affected by abusive lending practices,” Ney said. “Financial institutions and other lenders are also victims of mortgage fraud and lose millions each year through this type of corruption.

“(The) hearing is another important step as we attempt to find common ground with comprehensive solutions to the problem of abusive lending,” he said.

McCall said the best deterrent to fraud is “strong law enforcement that aggressively prosecutes those who commit mortgage fraud and sends a clear message to those who contemplate it.”

Criminals who aren’t aggressively prosecuted “are quickly back on the street with a new company or in a different state, defrauding others,” he said.

Mortgage brokers who do report instances of alleged fraud often complain about the law of communication or follow-up from law enforcement, McCall said.

“The current system is viewed by lenders as unidirectional — mortgage lenders report fraud, but never hear back about their reports,” she said. “A feedback mechanism could benefit both lenders and law enforcement.”

Improved technology could also help the industry battle mortgage fraud, but the industry needs help from policymakers, McCall said.

She suggested uniform licensing and registrations to track loan officers, brokers and appraisers; a form of “safe harbor” from lawsuits so mortgage lenders can talk freely with other lenders about fraud investigations; some sort of resource for mortgage lenders who try to recover losses from scammers who have gone out of business or have little capital to recover.

NAMB also believes that “legislation that would create a nationwide registry for all mortgage originators will help eliminate fraud in the marketplace. Such a registry will give mortgage professionals an avenue to report unscrupulous actions and eliminate bad actors for our business. NAMBs best lending practices and code of ethics holds its members to a higher standard, ensuring consumers are treated fairly.”

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: [email protected]

Tools for Your Next Big Decision.

Amortization Calculator

Affordability Calculator

Mortgage Calculator

Refinance Calculator

FHA Mortgage Calculator

VA Mortgage Calculator

Real Estate Calculator


Pre-Approval Resources!

Making well educated decions in a matter of minutes and stay up to date on the latest news Mortgage Daily has to offer. Read our latest articles to stay up to date on what’s going on…

Resource Center

Since 1998, Mortgage Daily has helped millions of people such as yourself navigate the complicated hurdles of the mortgage industry. See our popular topics below, search our website. With over 300,000 articles, we are guaranteed to have something for you.

Your mortgages approval starts here.

Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here. Add 1-2 sentence here.

Stay Up To Date with Today’s Latest Rates


Today’s rates starting at


5/1 ARM
$200,000 LOAN

Home Refinance

Today’s rates starting at


$200,000 LOAN

Home Equity

Today’s rates starting at


$200,000 LOAN


Today’s rates starting at


$200,000 LOAN