Miami ranked second nationwide in mortgage fraud claims

Even now, in the depths of South Florida’s real estate bust, instances of mortgage and appraisal fraud in South Florida continue to rise, according to statistics provided by the Federal Bureau of Investigation.

The schemes often involved inaccurate property valuations obtained from exaggerated or manipulated appraisals.

Last month, a Jacksonville appraiser was sentenced to four years in federal prison after he and a partner were convicted of purchasing about 55 houses through mortgage and appraisal fraud, the Examiner reported.

Authorities say he inflated the appraisals his partner used to support the purchase price. In that scheme, for example, they would agree to buy a house for $480,000 and then submit an inflated appraisal and obtain loans for $625,000, pocketing the difference.

The top states for mortgage fraud are California, Florida, Georgia, Illinois and Michigan. Additionally, the government reports the downward trend in the housing market through 2009 and 2010 will provide a favorable climate for a continued increase in mortgage fraud claims.

Miami ranks second nationwide (behind Los Angeles) in cases of suspected mortgage fraud, with 5,155 cases identified for prosecution in 2008.

Reports of suspected mortgage fraud increased 36 percent in 2008, to 63,713 complaints, compared to 46,717 complaints in 2007. More than 33,000 cases of mortgage fraud cases were reported during just the first three months of 2009, the latest time period for which statistics are currently available.

The FBI reports that mortgage fraud continues to be a low-risk, high-yield crime perpetrated by all parties, including mortgage brokers, lenders, buyers, sellers, appraisers, underwriters, accountants, real estate agents, land developers and builders.

But plummeting home values can also make appraisal fraud difficult to prove or can subject appraisers to unfair criminal or civil charges. Yesterday’s $400,000 house really is today’s $200,000 property.

The government defines mortgage fraud as “fraud for property,” which typically involves a borrower misstating income to qualify for a loan, or “fraud for profit,” which often involves elaborate schemes and multiple properties, straw buyers, inflated appraisals and other schemes aimed at diverting excess proceeds into the pockets of those involved.