Does mortgage fraud pay?

[sniglet]

[biliruben]

What type of mortgage fraud are you talking about?

has a great series on the ins and outs of fraud.

She identifies 3 types of fraud:

1) Fraud for Property (motive is pretty obvious) - liar loans are the obvious example.
2) Commission Fraud - misrepresentation by originator to get commission (again motive is pretty obvious).
3) Fraud for profit - this sounds like what you are thinking of in this post. This could net someone hundreds of thousands of dollars. Is it worth it? Should you just stick up a seven eleven for 40 bucks instead?

My guess is that armed robbery generally garners a stiffer sentence, without nearly as lucrative reward, than mortgage fraud. Plus you are taking a chance on getting shot. I think I'd pick mortgage fraud over armed robbery any day.

[biliruben]

Also, I don't think that the chances of getting caught are as great as you think.

When the market was going up 20%, foreclosure wasn't a foregone conclusion, so to speak. I could see someone justifying it as a victimless crime.

As long as prices were going up.

[sniglet]

[biliruben]

[Tony Soprano]

[sniglet]

[jillayne]

There's usually a ringleader; someone very cunning, who knows exactly what to do: He/she finds a NEW loan originator who knows nothing, and an escrow person who is already living on the edge (someone whose business is going downhill) and then the ringleader finds a very stupid appraiser who is desperate for cash.

The ringleader could be a real estate agent or sometimes is a mortgage broker (who then locates a desperate/new real estate agent.)

You've reminded me that I need to continue my mortgage fraud series. I'll outline a very juicy case study that happened in WA state. Stay tuned.

Meanwhile, my phone is ringing off the hook from 5AM to midnight now, from loan originators who have all waited until the last minute to take their required continuing ed and their test. They are starting to sound real panicky.

Maybe I should raise my prices. LOL.

[jillayne]

Oh, one more thing. The ringleader-types all have one thing in common" They are super-arrogant. Somewhat the manic type that believes they can fly; that they're supermen and nobody can catch them.

It's the kind of very high, strong, self-confidence you see in successful professional atheletes, except the mortgage fraud ringleader's purpose is immoral.

So, to answer sniglet's question, it's a bit of a high. Think about a person with an addiction problem. They might be able to kick the addiction, but the addictive personality remains and they still crave the high they get from experiences of living on the edge.

Apologies: Psych Grad School; one more quarter. Wish me luck on getting my thesis approved; I'm almost done!

I guess that's the kind of analysis you get when you mix a psych/philx/ethics major with mortgage lending.

[biliruben]

Congrats, Jillayne!

I eagerly await your continued series.

Definitely raise your rates - you're nearly a Dr.!

---

So, to answer the original question: how often are these ringleaders caught?

Do they get longer or shorter sentences than some dude sticking up a 7-11 for $40?

[laxtosnoco]

[jillayne]

Thanks, guys. Good advice. One professor has already signed off, three more to go. One of the remaining profs has VERY high standards, which is fine. Another rewrite isn't going to kill me.

In answer to b's question regarding how often they're caught, remember, this is only one person's perspective. I believe that the government will never have enough resources to go after every single egregious case that crosses their path, which is one of the reasons why you constantly see me cheering for industry self-regulation. Government resources are reserved for the worst of the worst cases and then, if it looks like we're talking about any activity that crosses state lines, they turn it over to the FBI, which is HUD's enforcement arm. The FBI definitely will go after the biggest of cases.

It's a utilitarian way of thinking: We maximize the resources we DO have by spending our time going after the people who are harming the greatest number of consumers.

In terms of what they get, well let's just say that if you hold a license such as a state issued license to practice real estate, escrow, appraisals, and so forth, the judge holds that person to a higher standard than your average armed 7-11 thief that came from tough circumstances such as coming from a family that lived in a van down by the river.