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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/8/14/2019 Fraud Task Force Lake Elsinore
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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/
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