Fraud Task Force Lake Elsinore

8/14/2019 Fraud Task Force Lake Elsinore

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Fraud Task Force Southwest Riverside County Association

of REALTORS and the Inland Valleys

Association of REALTORS have joinedto form a Task Force.

The Task Force is comprised of

Directors from both Associations,

attorneys from Giardinelli & Duke, APC,

and various members of the real estate

community.


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Purpose of Task Force Education Campaign

Raise awareness of the Problem toInform, Prevent, and Deter

fraudulent transactions

Encourage Action

Law Enforcement

Government Agencies


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Defining the Problem

Any Intentional Misrepresentation in a RealEstate Transaction Intended to

(1) Cheat Someone Out of Money or Property, (2) Obtain Housing Under False Pretenses, or

(3) Secure Better Credit Terms

Mortgage Fraud typically involves more than

one kind of fraud: Social Security Fraud, wirefraud, mail fraud, identity theft, appraisal fraud,fraudulent liens, etc.


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Two Basic Types of Fraud

Fraud For Housing:Typicallycommitted by individual borrower inan attempt to acquire and/ormaintain ownership of a home.


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Income = 23%

Liabilities = 21%

Occupation = 14%

Credit = 13%

Property = 12%

Assets = 7%

SSN = 5%

Value = 5%

DISTRIBUTION OF MISREPRESENTED FINDINGS BY TYPE

The following pie chart depicts the distribution of significant misrepresentation findings by type. If reflects findings

for loans originated in 2006-2007, as of reviews completed through August 2007.

**Source: FannieMae Mortgage Fraud Update, September 2007


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Fraud for Profit:Motive is to

strip the equity from a property,falsely inflate property values or

issue loans based on properties

that do not exist. This is our MainConcern.


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Frauds Effect On Our Community

Mortgage Fraud often leads to foreclosure of the

property involved resulting in vacanthouses inneighborhoods and lowered property values.

Foreclosed and vacant properties have an adverseeffect on neighborhoods because abandoned

properties invite vandalism, squatters and, in theworst cases, crime. Also known as thebrokenwindow syndrome.

Lowered property values lead to lost tax revenue


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Frauds Effect on Individuals

In the worst cases, investors aredefrauded out of their life savings

and their good credit leaving them

vulnerable to lose their home.


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Fraud In CaliforniaThe Worst Its Ever Been

California ranks 2nd in the nation

for frequency of mortgage fraud.* Source, Mortgage Asset Research Institute


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Statistically Speaking

0

10

20

30

40

50

Ranking

2002 2003 2004 2005 2006

Year

Leading States for Loan Fraud

California

Nevada

Colorado


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0200

400

600

800

1000

1200

Cases

2003 2004 2005 2006 2007

Year

Pending FBI Cases

** Source: Federal Bureau of Investigation specia l agent Bill Stern.

Pending F.B.I.Mortgage Fraud Cases


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Real Estate Fraud Leads to

Increased Foreclosures

Historically, it is estimated that 45% of earlypayment defaults are the result of Fraud.

New estimates put that number at75%.

As of November, 2007, 1 in every 88homes in

California was in Foreclosure that numbercontinues to rise in 2008 and we believe Fraud is asignificant factor in the rise of foreclosures.


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Southwest County Has ADisproportionately

Large Number of Foreclosures 1 in every 43 homes in Riverside

County is in Foreclosure. According towww.Foreclosure.com, as of February 25, 2008,

Riverside County has 6,264 homes listed under foreclosure. 438+ of which are in Lake Elsinore. Lake Elsinore has almost 7% of the foreclosures but less

than 5% of the population in Riverside County.
http://www.foreclosure.com/http://www.foreclosure.com/


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U.S.

Foreclosure Map


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Effects of Fraudulent Transactions

Artificially inflated prices artificiallyincrease property taxes

And leave the owner with a loan that the

property cannot support

So when mortgage rates adjust, the owner

cannot refinance, which often leads to

foreclosures.


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Citys Revenue Suffers Foreclosures lower

property values. Lower property

values reduce thecitys revenue.

City services may beimpacted effectingALL citizens.


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Blight


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Victim

Blight


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0

50

100

150

200

250

300

350

Q1

04

Q2

04

Q3

04

Q4

04

Q1

0

Q2

0

Q3

0

Q4

0

Q1

06

Q2

06

Q3

06

Q4-06

Q1

0

Q2

0

Q3

0

Q4

0

Data courtesy of Chicago Title

Lake Elsinore Homes Sales by Quarter

2004 - 2007


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$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Q1

04

Q2

04

Q3

04

Q4

04

Q1

0

Q2

0

Q3

0

Q4

0

Q1

06

Q2

06

Q3

06

Q4-06

Q1

0

Q2

0

Q3

0

Q4

0

Data Courtesy of Chicago Title

Lake Elsinore Median Price by Quarter

2004 - 2007


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Quick Review of

Fraud for Profit Schemes

Property Flipping Property values are

artificially inflated through false appraisals. Theproperty is then transferred or refinancedseveral times for a higher price.

Straw Buyers Identity of the borrower isconcealed through the use of someone elses

name or credit. Here someone may allow theircredit to berented in return for a payment ofmoney taken out of the loan proceeds.


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Churning: Borrowers continuously refinance orsell, each time within 45-60 days so no paymentbecomes due. Borrowers will use funds from a

subsequent closing to make 1-2 payments onearlier loans to delay closer investigation.

Foreclosure Schemes: The perpetrator misleadsthe homeowner into believing that they can savetheir homes in exchange for a transfer of the deedand payment of fees. The fraudster profits by re-mortgaging the property or pocketing the fees paidby the homeowner.


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Fictitious/Stolen Identity A fictitious orstolen ID will be used on a loan application.

Perpetrator keeps the money and ruins thevictims credit.

Elder Fraud this includes fraudulentreverse mortgages


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Were Now Facing

A New Wave of Fraud

Preying upon those who are facing foreclosure.

Foreclosure scams always increase when the

housing market begins to decline, such as

the market we are experiencing right now.


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Foreclosure Scams

What Are They?

Foreclosure Rescue any programthat induces homeowners to part withthe title to their home based on claims

that doing so will save the home fromforeclosure.


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How Foreclosure Rescue Scams Work As part of the rescue the homeowner will berequired to deed the property to the new borrower who

is investing in a rental property. The borrowers loan removes all the equity in thehouse.The scam leaves the distressed homeowner as merelya renter in a home they no longer own, unaware the

new borrower is not making payments.When new borrower defaults on the loan, thehomeowner is evicted and has lost the house and allthe equity in it.


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Foreclosure ScamsSpotting the Signs

Someone who says there are only one or two options tostop foreclosure. There are usually about dozen.

Anyone who tells you not to contact your lender. Someone who claims to be able to eliminate your

mortgage. Anyone who offers to loan you the money to pay off the

foreclosing lender at a high rate of interest.

An investor who offers to buy your house atsignificantly less than market value. Anyone who offers to help you collect the excess

proceeds from a foreclosure sale. You can collect theproceeds yourself its not difficult.


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Mortgage FraudHarms Everyone

Fraudulent Real Estate Transactions Harmthe entire community.Property taxes go up as a result of

inflated prices

Foreclosed homes sit empty,bring property values downand invite crimes of opportunity.


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Partnering with REALTORS

REALTORS can provide education

programs geared toward raising

awareness with:

Senior Citizens

New Homebuyers

Individuals Facing Foreclosure


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Partnering with REALTORS

The City can assist in deterring andpunishing fraud.

Provide avenues for citizens to turn

to when they suspect they arevictims of fraud.


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Help Us

Help Lake Elsinore

-Reduce Crime

-Stop Mortgage/

Fraud Task Force Lake Elsinore

Documents

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