Real Estate Fraud is on The Rise
Every day, in every city across the country, real estate industry professionals participate in fraudulent transactions. Many are fulfilling a carefully orchestrated scheme, while others are sincerely unaware that their actions could bring them fines, loss of licensure, or even jail time. They believe what they're doing is legal and condoned because "so many established people are doing the same thing." The key to preventing and detecting fraud is knowledge—by understanding what fraud is and how it works you can protect yourself, your business, and your customers.
No matter what your role is in a deal, you have the opportunity—simply by touching the application—to affect the validity of a homeowner's real estate transaction. Each one is an opportunity for an honest loan, and each person your customer works with has a responsibility to continue that transaction with the same integrity. As the borrower is handed off from REALTOR® to loan officer to processor to underwriter to lender to title and escrow, there are hundreds of occasions for fraud. When you know what to look for (and refrain from infringing on the law yourself), you can have a significant positive impact on the quality of your business.
In 2005 there were nearly 22,000 'suspicious activities' reports filed within the real estate industry, yet only three percent were ever investigated. Imagine if you only completed three percent of the items on your to-do list—you'd be frustrated, scrambling for resources, and in need of serious help. That's how the Financial Institution Fraud Unit of the FBI feels. Without adequate resources, or an agreed-upon way to fund all of these cases, the FBI and other law enforcement officials are left treading water.
So what can you do? Take action when you suspect fraud. Do your due diligence on every single real estate transaction that comes across your desk and catch false information before a loan closes, whatever the likelihood of fraud. You never know who else is involved in the deal, and what ulterior motives they may have. Check the property's background, look for recent sales, and get a second appraisal if you feel the numbers just don't add up. And always, always, always ask for back-up verification on questionable information.
If you know someone has committed fraud, report it. If you let it go, you can bet that person will go on to take advantage of another unsuspecting company.
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