Mortgage fraud growing, Utah 5th in nation for number of cases in '07

Utah ranks fifth in the nation for mortgage fraud, and state leaders have vowed to crack down on the problem.

A report Thursday by the Mortgage Asset Research Institute for the Mortgage Bankers Association found that the Beehive State had a high incidence of people committing mortgage fraud. The most common types of fraud included misstating income or employment history and falsifying financial information.

The top state for mortgage fraud was Florida, which led the list for the second year in a row, followed by Nevada, Michigan, California and Utah.

The report came from an industrywide database that includes information about fraud and fraud allegations collected from approximately 700 mortgage companies, ranging from finance giants Fannie Mae and Freddie Mac to mid-size lenders.

The report, released at a Mortgage Bankers Association conference in Chicago, did not detail the exact number of fraud cases by state or nationwide. Instead, the group calculated a "fraud index" by comparing fraud reports with the number of home loans made in each state.

It cited FBI statistics showing 46,700 mortgage-fraud reports in 2007, a more than 30 percent increase from the year before and twice as many than in 2000. Federally insured lenders are required to report fraud to the government.

Mortgage fraud has represented about $1 billion in losses over the past decade, the Mortgage Bankers Association said.

David Kittle, chairman of the mortgage bankers' group and chief executive of Principle Wholesale Lending in Louisville, Ky., said the industry does not blame borrowers alone for committing fraud. He said real estate agents, mortgage brokers, builders and lenders all share responsibility for a climate of lax standards that has now ended.

"There's enough responsibility to go around to everybody," he said in a conference call with reporters.

The Mortgage Bankers Association is calling for more than $31 million over the next five years in new funding for the FBI and Justice Department to fight mortgage fraud by hiring new investigators and prosecutors.

U.S. federal law enforcement agencies are planning a nationwide crackdown on suspected cases of mortgage fraud in June, a U.S. Department of Justice official said Thursday.

"Operation Malicious Mortgage" is the third national effort by federal agencies, John D. Arterberry, the executive deputy chief of the Justice Department's fraud section, criminal division, said Thursday at the bankers conference.