WASHINGTON -- Good news! There are no new mortgage frauds. But the bad news is that the old schemes are becoming more intricate, and the criminals who work them are more active then ever.
"Mortgage fraud is so easy, even a caveman can do it," said Scott Borshears, the FBI's mortgage-fraud coordinator.
No wonder fraud has become the f-word in the home-loan business.
The Financial Crimes Enforcement Network fielded nearly 15,000 mortgage-related suspicious activity reports (SARs) in the first quarter of fiscal 2008, which ended Dec. 31. And special agent Borshears expects the pace to quicken.
"We'll get over 60,000" SARs this year, he said at a recent conference in Chicago. By comparison, FinCEN received a record 46,700 reports of suspicious activity in fiscal 2007, up from 35,600 in 2006.
The FBI's estimate jibes with a letter the Mortgage Bankers Association sent to members last month, warning that mortgage fraud is "a burgeoning crime." But the number of SARs is probably only the tip of the fraud iceberg because only federally regulated institutions must file them, whereas lenders who are not required to comply with the government dictum make the bulk of all home loans.
Still, the basic scams haven't changed, said Ann Fulmer, industry-relations manager at Interthinx, an Agoura Hills, Calif., firm that helps lenders flag fraudulent loans. "The same old crap has been going on forever."
But the swindles are growing more complex, according to MBA chairman-elect David Kittle, who is president of Principle Wholesale Lending in Louisville, Ky.
"The deviousness of the schemes continues to evolve," he said.
For example, there's new twists on builder bailouts to move inventory. Under the old scam, builders, using inflating appraisals, would sell a $100,000 house for $120,000 and use the extra money to fund the buyers' down payments and closing costs. Now they are offering all kinds of "lavish (buyer) incentives" they hide from lenders.
Builders used to give away microwaves. Now, said Jenny Brawley, fraud investigations manager at Freddie Mac, they give away cars, swimming pools, two years' worth of homeowner-association dues, four years of mortgage payments, even five years of guaranteed rental income.
These incentives are not only built into the inflated purchase price; they are not disclosed to the loan officer or the appraiser. "In fact," Brawley said, "there is an organized effort to conceal them" from lenders, which end up providing loans for more than the property is worth.
The fraud specialist is also seeing a lot more involvement in these types of schemes from real-estate agents.
"They're the ones shopping these loans to lenders," she said.
Rescue scams aimed at owners facing foreclosure also have a new twist. Under the old ruse, troubled owners are tricked into signing their homes over to the perpetrator with the promise that they will be able to get their homes back when they get back on track.
Owners are told to make their payments to the con man who will forward them to the lender. But the con man never makes any payments. Instead, he collects money from the hapless owner, and the house eventually goes into foreclosure.
These days, the scam artists are going a step further. Rather than simply letting the house go back to the lender, they are selling it to an unsuspecting buyer who uses another lender. Now they are collecting "rent" from the original owner and a payoff from the sale of a house they took under false pretenses.
Then there's "puffing," a new wrinkle on the flipping scam. Instead of buying a house on the cheap from a seller who wants out desperately and selling it an inflated price the next day, the drifter offers to buy the place at an inflated price with the buyer agreeing to kick back the difference at closing.
Now the con collects on both ends, said John Gray, a fraud-prevention specialist at Bear Stearns, the Wall Street investment-banking company -- once when he buys and again when he sells.
Phony investment clubs are also growing in popularity. Gray said, "I can't tell you the number of deals we see" in which investors are lured into joining with others to put their money into buying houses at distress-sale prices with the promise of big rewards when the houses are sold.
Of course, the houses are never purchased. But if they are, they are sold at inflated values to fictitious buyers. So now, the thief not only has money from the unsuspecting investors, he pockets the proceeds from the sale as well.
"It's amazing," said Gray. "Guys are coming in through the front door and again through the back door."
Another disturbing trend: Organized crime is using mortgage fraud to pad its bank accounts and launder gains from other illegal enterprises.
Traditionally, fraud has been used to obtain houses, said Merle Sharick, vice president of the Mortgage Asset Research Institute, a provider of information services and fraud-prevention solutions.
No one knows for sure how much all this is costing lenders and investors.
Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing finance industry publications.