Tighter lending 'spurs 45% jump in mortgage fraud'

3 December 2008

Tighter lending criteria in the wake of the subprime collapse and the ensuing financial crisis fuelled a 45 percent year-on-year jump in mortgage fraud during the second quarter of 2008, according to the latest figures from the Mortgage Asset Research Institute (MARI).

The institute said much of the increase was caused by potential borrowers trying to get around stricter rules on lending. Misstatements of financial assets or employment status accounted for 65 percent of mortgage fraud incidents in the first half of the year, it added.

Some common forms of misrepresentation included the submission of fake bank statements drawn up on home computers and pay stubs altered using white-out correction fluid, the Associated Press reported.

Nationally, Florida led the US in mortgage fraud incidents, accounting for around 20 percent of all reported cases during the second quarter. It was followed by California and Illinois.

Over the last ten years, mortgage fraud is thought to have cost lenders around $1 billion, according to estimates from Washington DC-based industry group the Mortgage Bankers Association.

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