FBI: Scams on the Rise, Here to Stay

How to Protect Yourself and Your Home

Brett Widness, Senior Editor at AOL Real Estate

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According to a study recently released by the FBI, mortgage fraud was on the rise last year, and is expected to continue this year.

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The top states for mortgage fraud in many ways mirror the list of places where the home owners have suffered the worst from the rise of unemployment and foreclosures, with California, Florida, Michigan, Arizona, Ohio, and Nevada making list of top 10 states.

"Mortgage fraud trends in 2008 reflected the overall downturn in the US economy initiated by the sub-prime mortgage crisis of 2007. The US stock markets suffered their deepest losses since the 1930s; unemployment increased dramatically; the mortgage loan industry reported a spike in foreclosures and defaults; and financial markets continued to contract, diminishing credit to financial institutions, businesses, and homeowners. These combined factors uncovered and fueled a rampant mortgage fraud climate," the report states.

In fact, the Manhattan District Attorney recently indicted 13 suspects as part of an investigation into a $100 million fraud, although these individuals are accused of defrauding big banks rather than individuals.

* Get referrals for real estate and mortgage professionals when you want to buy or sell a home. And once you do, check out their licenses with state, county, or city regulatory agencies. Most of these people are exceedingly honest and above-board -- it's just a small percentage who have given the overall profession a black eye.

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* Do your own research into what other homes in the neighborhood have sold for. Also, look into recent tax assessments of neighborhood homes.

* Beware of "no money down" loans. These are a gimmick used to entice people to buy a home they really can't afford.

* Don't let anyone (i.e., a realtor, mortgage broker) talk you into making a false statement on your loan application, like overstating your income or lying about where your down payment is coming from.

* Never sign a blank document or a document containing blank lines. Be sure to read and review all loan documents signed at closing. If you don't understand what you're signing, get an attorney who can review the documents for you.

As the FBI report concludes:"The downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate. Several of these schemes have the potential to spread if the current economic downward trend, as expected, continues into 2009 and beyond. Increases in foreclosures, declining housing prices, and decreased demand place pressure on lenders, builders, and home sellers."