Low mortgage rates have brought more than a refinance boom, it has brought a surge in mortgage fraud. FBI statistics show that it is one of the fastest growing white collar crimes in the United States. The number of suspicious activity reports from financial institutions tripled from 17,127 in 2004 to 62,494 in the first three quarters of 2008, equating to billions of dollars of fraud.
House Representative Kendrick Meek (D-FL) has reintroduced a bill to establish a nationwide mortgage fraud task force to fight the alarming trend. His sponsored legislation, the Nationwide Mortgage Fraud Task Force (MFTF) Act of 2009 would establish a Nationwide MFTF in the Department of Justice.
According to trends from 2006-2008, reported by the Mortgage Asset Research Institute (MARI), fraud trends are tracking the housing markets hit the hardest by home equity declines. Florida, California, and Illinois top the list of mortgage fraud reporting consistently through the mortgage implosion.
This correlation seems self evident considering the nature of the mortgage fraud being reported. MARI research analyst reports, "It is not surprising now with tighter industry credit standard, that the largest percentage increases from quarter to quarter involve the financial profiles of borrowers." Reflected in the numbers, 65 percent of reported mortgage fraud is categorized as general application misrepresentation while another over 30 percent attributed to income misrepresentation on the application.
Despite the significance of the amount of mortgage fraud and consistent rising trend the MFTF legislation may still face political resistance. Meek introduced similar legislation in the closing days of the last Congress. This legislation passed the House by a healthy margin of 350 to 23, but was blocked by Republicans in the Senate.
However, with the dramatic change in the partisan landscape of Congress, another quarter of alarming data, and toxic mortgage assets still stalling the market this legislation seems to be on much stronger footing.