There is not only one type of mortgage fraud. A borrower may claim at closing that his employment status has not changed even though he has either been terminated or is aware he will be terminated. In other instances of mortgage fraud, a borrower will claim the property he is purchasing will be used as his principal residence so he can obtain a lower interest rate — even though in reality the home will be an investment property for rental purposes.
With the price of homes increasing over the past two years and interest rates for a 30-year fixed rate mortgage at approximately 8.628%, instances of fraud may become more prevalent. The dollar does not go as far as it did even a short time ago and economists are focused on inflation, unemployment, wages and growth.
CoreLogic’s 2023 Mortgage Fraud Report recently found that occupancy fraud has nearly tripled since 2020. Recently, DSNEWS published an article finding that foreclosure filings were up 28% in some areas in the third quarter. Occupancy fraud and employment status fraud can contribute to higher delinquency rates because there is a higher credit risk. Are we starting to see that now? It’s hard to tell.
Banks, servicers, lenders and others in the mortgage industry are urged to review and strengthen best practices related to verification of employment and occupancy. Being that the two may be correlated to higher delinquency rates due to increased credit risk, these businesses will be well served in being pro-active with regard to these policies, especially in light of certain economic outcomes. Banks, servicers, lenders and others should also report any suspected fraud to the proper authorities.
Vincent J. Averaimo is a Connecticut civil litigator who handles a wide array of civil litigation matters in state and federal courts, including, representation of banks, financial institutions, investors and mortgage servicers in end-to-end default services and complex litigation. Barton Gilman, LLP handles end-to-end default services in CT, MA and RI.