One of the reasons for the housing crisis in the United States was mortgage fraud. Homeowners, financial institutions, mortgage brokers, appraisers and real estate brokers were all involved in various aspects of mortgage fraud during the housing boom years in the United States. In the year 2010 the number of cases involving mortgage fraud reached their highest level. It was reported that more than 70,000 cases of mortgage fraud were identified in 2010. This is more than twice the number of cases involving mortgage fraud reported in 2006, the year that the real estate market reached it’s height. To put this level of mortgage fraud in perspective, let’s look back to the year 2000. The level of mortgage fraud in 2010 was 22 times greater than the level of mortgage fraud in the year 2000!

Mortgage Fraud Law Suits

There are many pending lawsuits against mortgage companies, banks and other financial institutions that claim that the important mortgage documents were either misplaced or forged. Some of these lawsuits have been successful due to the testimony of the bank employees involved in the actual mortgage fraud process. An example of this litigation involved Bank of America. One of it’s employees in New Jersey testified in 2009 that the company regularly held on to mortgage notes even after the loans were sold to investors. A bank or financial institution cannot prove they are entitled to foreclose on a home if they do not produce the mortgage note. More and more homeowners are using the defense that the bank does not have standing to litigate because they do not have the mortgage note assigned to them.

Mortgage Brokers

During the housing boom in the years 2003 through 2007 the process used by Americans to obtain mortgages changed. Prospective homeowners used to go to their bank or financial institutions and apply for a mortgages directly. With the housing boom came the development of the mortgage broker industry. Mortgage brokers who didn’t work for the financial institutions acted as intermediaries in these transactions. This created a new middle man who was able to manipulate the mortgage process. Mortgage brokers could obtain false valuations of homes from real estate appraisers. They could modify the numbers on the application submitted by the homeowner to conform with the financial institutions requirements, even if the information they were providing was false. They were able to advise homeowners what they should put on their mortgage applications to obtain a mortgage. Truthful mortgage applications declined.

Robo Signers

As the real estate crisis increased banks were over run with mortgages going into default. Instead of hiring sufficient employees and appropriately documenting their foreclosure lawsuits, they engaged robo signers. These were individuals who would sign thousands of mortgage documents sometimes in one day without even looking at or reading these documents. Some of the largest financial institutions in the country have been guilty of using robo signers. These institutions include Bank of America and Wells Fargo, JP Morgan Chase, CitiGroup. There are currently lawsuits pending by all 50 state attorney generals and by the Obama Administration with regard to improper mortgage foreclosure practices. At the present time the financial institutions are in the process of negotiating a settlement on these lawsuits. Informed sources have suggested the settlement amount could be as high as 30 billion dollars!!

About the Author

Elliot Schlissel, Esq. is the former president of The Commercial Conference of New York. His law firm, The Law Offices of Elliot S. Schlissel, practices foreclosure defense, bankruptcy and real estate litigation in the Metropolitan New York area. They can be reached at 1-800-344-6431.