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The Memphis Tigers are seeded Number 2 in their region in the NCAA tournament. However, Tennessee has another noteworthy ranking in which, Memphis trial lawyers are justifiably pleased. Our state did not rank in the current Top 10 in alleged mortgage fraud. Woo Hoo! The number of reported incidents of mortgage fraud has reached an all-time high in other states even as the number of home loans being issued has shrunk, according to a report released Monday. Cases of reported fraud surged 26% from 2007 to 2008, according to the Mortgage Asset Research Institute (MARI). In its 11th report, MARI reports the state of the nation for the third quarter of 2008.

Rhode Island topped the list, followed by Florida, which had held the No. 1 slot in 2007. Incidents of fraud in Rhode Island were three times what would have been expected given the number of loans made last year, the report said, although the authors said they weren't sure why.

Next on the list were Illinois, Georgia and Maryland, which landed on the top-10 list for the first time in the study's 11-year history, up from No. 15 in 2007. The State of Rhode Island had the highest percentage of fraud on tax returns and financial statements. Not surprisingly, the FBI investigates mortgage fraud in two distinct areas: Fraud for Profit and Fraud for Housing. Fraud for Profit is sometimes referred to as "Industry Insider Fraud" and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties. Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders. Fraud for Housing represents illegal actions perpetrated solely by the borrower. The simple motive behind this fraud is to acquire and maintain ownership of a house under false pretenses. This type of fraud is typified by a borrower who makes misrepresentations regarding his income or employment history to qualify for a loan.

The FBI lists several areas of suspicion:

MORTGAGE FRAUD INDICATORS

Inflated Appraisals
• Exclusive use of one appraiser

Increased Commissions/Bonuses - Brokers and Appraisers
• Bonuses paid (outside or at settlement) for fee-based services
• Higher than customary fees

Falsifications on Loan Applications
• Buyers told/explained how to falsify the mortgage application
• Requested to sign blank application

Fake Supporting Loan Documentation
• Requested to sign blank employee or bank forms
• Requested to sign other types of blank forms

Purchase Loans Disguised as Refinance
• Purchase loans that are disguised as refinances
requires less documentation/lender scrutiny

Investors-Short Term Investments with Guaranteed Re-Purchase
• Investors used to flip property prices for fixed percentage
• Multiple "Holding Companies" utilized to increase
property values

As the recession deepens, both real and imagined violations are likely to be investigated. Remember, if you are contacted by an investigating agency, a financial institution, or a lender, seek the advice of an experienced attorney in this area.