Fraud by Mortgage Brokers Is Said to Be on the Upswing
Ratner, Juliana, American Banker
Fraud committed by mortgage brokers has been on the upswing for the last few years, according to industry sources.
While industry insiders are quick to say that most mortgage brokers are honest, they add that there is an opportunity for brokers to forge papers and misrepresent borrowers to lenders and to mortgage insurers that provide coverage to help marginal borrowers qualify.
Some sources said misrepresentation by brokers in some markets has been prevalent since the end of the refinance boom as the brokers try to keep up the high volume of applications they enjoyed when rates were at the lowest level since the 1970s.
"There appears to be a number of folks who didn't want to see the slowdown" in volume when rates rose at the beginning of 1994, said James Croft, executive director of the Mortgage Asset Research Institute, Reston, Va. "They are trying to make the loans fit into programs where they didn't really fit."
Mr. Croft provides public information about fraud for a fee. He also has a large data base of firsthand information from member- lenders. That data base is available only to participants.
Mr. Croft said that while broker fraud exists in every state, it has been most prevalent in California and southern Florida.
Some wholesale lenders take measures to head off fraud by using screening procedures on brokers with which they do business. …