If you are at all concerned about the problems associated with Real Estate and Mortgage Fraud, hop on a plane and get yourself to Las Vegas for next week’s inaugural Mortgage Fraud Blog Conference–the first national conference to bring together Realtors, mortgage brokers, bankers, attorneys, appraisers, industry vendors, federal employees, media and others to share best practices and methods in detecting and preventing the fastest-growing white collar crime in America today.

Many of the top people involved in Real Estate and Mortgage Fraud prevention will be attending and speaking at the conference, including:

• William Brewster: Fannie Mae’s Director of Anti-Fraud Initiatives.
• Ellen L. Cohen: Assistant United States Attorney in the West Palm Beach office of the United States Attorneys Office for the Southern District of Florida.
• Kathy Coon: Chief Appraiser-Director of Appraisal Quality Control at FNC, Inc.
• Jon R. Daurio, Esq.: Chairman & CEO of Kondaur Capital Corporation.
• Rachel Dollar, CMB: California attorney and recognized expert in the mortgage lending industry. Rachel is the editor of the acclaimed public service industry website Mortgage Fraud Blog.
• Carl R. Ernst: CEO of Ernst Publishing Co., LLC, and co-chair of the Land Fraud Workgroup of the Property Records Industry Association.
• Timothy Ervin: EMC Mortgage Corporation’s FPD/EPDAudit Team and supervisor of fraud investigations at EMC Mortgage.
• Linda S. Finley: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC.
• Ann Fulmer: Vice President at Interthinx and a former victim of mortgage fraud.
• William P. Heller: Akerman Senterfitt.
• Douglas C. McNabb: McNabb Associates.
• Geoffrey K. Milne: Partner in the Litigation Department of Hunt Leibert Jacobson, PC.
• Barbara E. Nelan: Assistant United States Attorney in the Northern District of Georgia.
• James R. Park: Senior Vice President and Chief Appraiser for Aurora Loan Services, a Lehman Brothers Company.
• Michael R. Pfeifer: Managing Partner of Pfeifer & Reyolds, LLP — a law firm that concentrates on representation of mortgage lenders, brokers, servicers, and investors.
• Ralph Roberts, CRS, GRI: Founder of FlippingFrenzy.com, Realtor, author, blogger, consultant and coach who works alongside enforcement agencies, regulators, and financial institutions to educate, prevent and inform on the problems associated with Real Estate and Mortgage Fraud.
• Robert Russell: Counsel to Office of Thrift Supervision (OTS) Director John Reich.
• Merle Sharick: Business Development at Mortgage Asset Research Institute (MARI).
• Robert Strupp: Director of Research and Policy with the Community Law Center, in Baltimore, Maryland.

The Inaugural Mortgage Fraud Blog Conference is being held from Wed., Nov. 14 through Thurs., Nov. 15 at Circus Circus Casino & Hotel in Las Vegas, Nevada. For more information or to register before it’s too late to attend, visit the Mortgage Fraud Blog Conference website.

At industry events lately, real estate professionals gather to talk shop and discuss market trends for 2007, but I notice that nobody’s talking about the elephant in the conference hall. We’re predicting the health of the market. We’re exploring new technologies. We’re trading secrets. We’re swapping ideas and business cards. But the silence over what I believe is a looming foreclosure epidemic, is deafening. Nobody utters the words “flipping,” “fraud,” or “foreclosure.” It’s almost as if these three words have been banned from the industry.

I’ve attended dozens of conferences, and very few of them schedule sessions devoted to real estate and mortgage fraud. The topic tends to have more of a following at conferences for mortgage bankers. Perhaps real estate professionals are simply too busy helping their clients buy and sell houses, or they find the topic less stimulating than others.

By not paying sufficient attention to real estate and mortgage fraud, however, we’ve become blind to the fact that illegal flipping, cash back at closing, and other forms of real estate and mortgage fraud are chipping away at the very foundation of the real estate industry, leading to shameful foreclosure rates that only promise to become tragically worse. While we’re discussing lead generation, marketing techniques, and the power of blogging, absent from our discussion is any mention of what to do to protect the homeowners, our clients-the people who butter our bread.

What is currently happening in the real estate and mortgage industry can only be described as the perfect storm. Fraudsters are ripping off lenders and homeowners with impunity. Artificially inflated housing values are soaring, and with them, so are property taxes and insurance premiums. Lenders are losing billions to fraud and then turning around and ripping off homeowners by selling them adjustable-rate mortgages and other high-interest loans they can’t possibly afford. And personal income just isn’t rising fast enough to keep up with the market. Strapped-for-cash homeowners are beginning to use their homes as ATMs, mortgaging themselves into foreclosure and bankruptcy.

Yet, few real estate professionals express any concern. They continue to carry on business as usual, and often “business as usual” includes actively participating in the fraudulent activities that threaten the American Dream of homeownership. In fact, the FBI estimates that 80% of all real estate and mortgage fraud involves industry insiders!

We need to turn these numbers around in a hurry before our entire industry collapses. We need to wake up and realize that our clients-average homeowners-are hurting. We need to recognize that fraud is destroying the very industry that feeds our families and that it directly contributes to the rising foreclosure rates around the country. We need to educate ourselves and our clients, and then take action to spot, stop, and report and post fraudulent transactions that we witness, regardless of whether the person committing fraud happens to be a client, colleague, friend, or family member.

If we fail to take action now, none of us will have the right to complain when our children and grandchildren cannot afford to purchase a house, when our friends and relatives have their homes stolen right out from under them, and when our businesses crumble because the average citizen cannot afford a home.

I would like to see future conferences focus a little more on that elephant we all seem to be ignoring.

As we all know, rampant fraud in the real estate industry has increased so sharply that the FBI recently warned of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.” With that in mind, a who’s who of federal and state entities are encouraging real estate professionals throughout Florida, Georgia, and North and South Carolina to attend a free, one-day symposium being held at the Savannah International Trade and Convention Center, June 22, in Savannah, Georgia.

While little is known at this point about the schedule, the symposium’s coordinators–which include the U.S. Department of Housing and Urban Development, the Florida Office of Financial Regulation, the Georgia Department of Banking and Finance, the North Carolina Commissioner of Banks, and the South Carolina Department of Consumer Affairs–are sure to put on a very informative and educational event.

If you are a FL, GA, NC, or SC-based mortgage banker, mortgage broker, loan originator, REALTOR®, appraiser, closing attorney, builder, developer, or law enforcement official, you should seriously consider attending. For more information or to register for the one-day symposium, click here or call Doris L. Needham in the Dept. of Housing and Urban Development office in Atlanta, GA, at (404) 331-5001, ext. 2075.

Someone much smarter than me once said, “Many of us spend our lives searching for success when it is usually so close that we can reach out and touch it.”

I’m in Indianapolis, Indiana, today delivering the Keynote Address for the Real Estate Success Summit. Close to 400 Realtors from around the greater-Indianapolis and surrounding areas are here at the Radisson Hotel in downtown Indy to hone their Business Planning, Pricing, Counseling Buyers, Systems Development, Niche Marketing, and Lead Generation skills around. My role, as the first speaker of the day, is to get the crowd pumped up and ready for a great day of learning and networking, and to remind everyone of our collective successes.

Teaching today’s sessions–at the invitation of STAR POWER® Systems founder Howard Brinton–are the following top producing Realtors, all of whom are STAR POWER Stars:

• Rob Levy from Prudential Northwest Properties in Portland, OR
• Leslie McDonnell from RE/MAX Suburban in Libertyville, IL
• Cathy Russell from Cathy Russell Real Estate in West Lafayette, IN
• Martin Bouma from Keller Williams Realty in Ann Arbor, MI
• Debbie Yost from RE/MAX Of Casa Grande in Casa Grande, AZ
• Mike Watkins from Mike Watkins Real Estate Group in Greenwood, IN
• Terry Moerler from AVIARA Real Estate in Westlake Village, CA
• Michael Maher from RE/MAX First in Shawnee Mission, KS
• Alexis Bolin from ERA Old South Properties in Pensacola, FL
• Jana Caudill from Keller Williams Realty Leaders in Crown Point, IN
• Darryl Baskin from Mcgraw Davisson Stewart Realtors in Broken Arrow, OK
• Debbie Morris from Morris Group Realty in Indianapolis, IN

That’s all for now (oh, aside from the fact that Ameriquest–yes, the same Ameriquest that earlier this year settled a $295,000,000.00 mortgage fraud claim–yesterday announced that it will implement a new “business model” that will result in the closing of 229 retail branch offices and the layoffs of about 3,800 workers, effective immediately). New “business model,” huh? So that’s what they’re calling it these days! Interesting.

I’m back in Boulder, Colorado, today and tomorrow working with Howard Brinton and his amazing staff over at STAR POWER® Systems on a new real estate and mortgage fraud education/awareness product for Realtors. While I’m not at liberty to say too much about the product itself (detailed info will be available soon enough), I will share that it’s going to be a great resource in the ongoing effort to spot, stop, and report real estate fraud.

Funny thing happened on the plane ride out to Denver from Detroit. While working with my assistant on my new book–Flipping Houses For Dummies, which will be published by John Wiley & Sons this November 2006 (ISBN: 0470043458)–we met Gregory Campbell, Inspector in Charge of the U.S. Postal Inspection Service-Detroit Division. Because most real estate and mortgage fraud cases involve allegations of Mail Fraud, the U.S. Postal Inspection Service, and Inspectors like Mr. Campbell, are all too aware of the dangers of real estate and mortgage fraud. It’s a small word, isn’t it?

I had a great dinner last night at The Briarwood Inn in Golden, Colo. If you ever make it out to this part of the country, you have to stop by The Briarwood. Nestled in the foothills of Golden, the Briarwood’s an idyllic setting for any occasion. With me were Howard and his wife Babs, my assistant, and Anita Padilla-Fitzgerald and her husband Gene from MegaStar Financial. We talked a lot about the challenges facing real estate industry professionals, and for Howard and Anita, even though they live so close, it was their first time meeting in person.

After I wrap things up here in Boulder with Howard and his team, I’ll be headed down to Denver to meet with Anita and her team of superstars. Then, tomorrow afternoon, Howard and my assistant and I fly to Indianapolis for STAR POWER’s Real Estate Summit, which I believe is close to being sold out, so if anyone’s still thinking about attending, now’s the time to register.

Thanks to REIPA Board member and Veros President/CEO Darius Bozorgi, who saw me speak at the 5th Annual NPRRA-REIPA Joint Conference in San Antonio earlier this month, I’ve been invited to deliver a Keynote Address at this year’s Predictive Methods Conference (PMC) in Dana Point, California. If you’re not familar with PMC, it’s the annual conference for mortgage lending executives, tech vendors, appraisers, academia and government regulators, all of whom gather to share their thoughts, questions, and insights about automated valuation models (AVMs), collateral risk management, and predictive analytics. Now that’s a mouthful, I know. Said differently, PMC is an informative conference delivering the latest advances and insights in collateral risk management and other mortgage technology, applications, techniques, standards and regulatory issues.

The focus of my address (like you couldn’t guess) is real estate and mortgage fraud. No other issue is as significant to the mortgage industry as fraud. The necessity to verify identity, employment, income, collateral and occupancy weighs heavy as, increasingly, more applicants push the edge of the envelope with both facts and risk. My address, titled “Ignorance of the Law is No Excuse: Recognizing, Avoiding, and Recovering from Mortgage Fraud,” will cover how to spot fraud and steer clear of gray areas in all real estate-related transactions.

One of the really neat things about speaking at this event is that one of the other Keynote speakers is Pro Football Hall of Fame member Joe Montana. According to one of the folks over at PMC, Joe will be talking about assessing risk and achieving success in the midst of chaos; a topic he’s very familiar with!

Click here for more information about PMC 2006. It should be a great event.

If you read this blog with any regularity, you may have noticed that I’ll be speaking at next month’s Joint NPRRA-REIPA Conference in San Antonio, TX, about technology’s growing influence in detecting real estate and mortgage fraud. With nearly every major newspaper in the country, along with industry trade publications and blogs like mine, covering the surge in real estate and mortgage fraud-related activity, it’s a no brainer that tech firms are rushing to market with solutions they claim can detect the warning signs of fraudulent real estate transactions.

Carlsbad, California-based BasePoint Analytics–an early provider of ’scientific fraud scoring’ software for the banking industry–says it now helps mortgage lenders by applying ‘lessons learned’ in banking’s fight against credit card fraud in the fight against mortgage fraud. As a result of using BasePoint’s ‘FraudMark‘ software, the company says real estate industry insiders are able to protect against fraud while keeping their mortgage offerings more affordable.

BasePoint may be onto something here. To combat credit card fraud, the nation’s banks essentially went through a 4-step ‘fraud detection solution evolution’ that spanned nearly 30 years. Those steps included:

1. Reactive Investigations: Banks manually investigated customer reports and tips from other institutions and law enforcement officials.

2. Exception Reporting: Banks used computers to track common indicators of risk, such as the number and amount of transactions in a day.
3. Analytical Prevention: Using advanced scientific pattern recognition software, banks were able to provide early warnings of potentially fraudulent activity.
4. Optimized Fraud Sciences: Banks optimized scores and rules to obtain the greatest profit while keeping fraud at a minimum.

The result of banking’s investment in this process has been a 70 percent reduction in credit card fraud.

As we know all too well, fraudsters and scammers have expanded their focus to include real estate, where complex underwriting processes and a competitive lending market enable them to steal money on a much larger scale. Making the problem even more challenging is the fact that fraudsters are joining forces with industry insiders like REALTORS, brokers, appraisers, lawyers, notaries, and closing agents to achieve their goals. BasePoint says its customers are turning to their company’s technology to leapfrog steps two and three in the fraud solution evolution and keep fraud in check.

As a part of my research for next month’s talk at NPRRA-REIPA Conference, I did some research on BasePoint’s FraudMark system, and found that it uses patent-pending technology to identify and provide analysis of applicants, brokers, and appraisers behavioral trends, as well as provide analysis of the historical patterns of both fraudulent and non-fraudulent loan applications. By combining both approaches, BasePoint says FraudMark provides a high degree of predictiveness to identify which loan applications present the greatest risk of fraud.

It’s an interesting claim, but since I’ve never used FraudMark myself, I can’t say one way or another if it actually works. At the end of the day though, despite unique ‘patent-pending technology,’ the product won’t make a bit of a difference unless mortgage brokers, lenders, and other industry insiders agree to use it. I don’t know how much FraudMark costs to install and deploy, but I’m guessing it’s a fairly expensive proposition. Despite the unknown cost associated with using the product, the fact that the overwhelming majority of real estate and mortgage fraud acts are NOT committed by mistake begs the following questions…

1. Will enough industry insiders use FraudMark (or any number of other technological solutions being rushed to market) to make a measurable difference in the fight against real estate fraud? And…

2. If not, why not?

I’ll take an educated guess at the ‘why not’ part… 1. Because industry insiders who commit fraud have no real incentive to stop; and 2. Because those who want to contribute in the fight against fraud cannot afford to participate via the use of ‘cutting edge’ technology like FraudMark.

While I’m a firm believer in capitalism and all that it stands for, perhaps it’s time for the Federal government to step in and develop educational standards and an evolving technological solution that all real estate industry insiders are compelled to use. I know that sounds like a pretty dramatic solution, but something has to be done soon to educate the masses and put affordable fraud detection technology into place.

According to BasePoint’s own internal data, mortgage fraud has grown at a rate of 140 percent per year over the past three years, costing mortgage lenders and their customers between $1 and $3 Billion annually. BasePoint also says that at least one in every 250 mortgage loans contain some element of fraud that will result in financial loss to the lender, and that up to 40 percent of early payment defaults include material misrepresentations on loan applications that could have been detected before the loan was funded.

Clearly, the risks and costs are too high for us not to be talking about this.

Even though I’ve been a real estate professional for some 25+ years, I’m still amazed by the size and scope of my own industry. Thanks to Bart Wilson from Voyager360.com, I recently had the chance to talk with Ira Luntz, President of Integreity Solutions, and a member of the Board of Directors of the Real Estate Information Professionals Association (REIPA).

Now, just in case you’ve never heard of REIPA, they’re a national trade association (headquartered in Durham, North Carolina) whose membership ranks includes professionals and the companies they work for, all of whom are involved in the business of providing real estate and public record information here in the United States. As most good membership-based associations do, REIPA provides an industry forum for the creative exchange of ideas and discussion of issues pertinent to its membership’s business climate. As it turns out, REIPA’s members are very concerned about real estate fraud, and to make a long story short, that’s how I found myself on the telephone with REIPA’s Ira Lutz.

As it turns out, for the last five years, REIPA has joined forces with another leading industry trade group—the National Public Records Research Association (NPRRA)—to host a joint conference on issues that are central to both organizations members. After speaking with Ira about the problems associated with real estate and mortgage fraud, we agreed that I should speak at this year’s NPRRA-REIPA Joint Conference, which is being held from April 5-8, 2006, in San Antonio, Texas (click here for the NPRRA-REIPA Joint Conference web site).

Right now, I’m scheduled to speak on “The Growing Technology Influence in Detecting Mortgage Fraud” (Friday, April 7, at 1:45 p.m.), and will also present a workshop entitled “Housing Investment Fear Factor” (Saturday, April 8, at 9:00 a.m.). In case anyone’s wondering, both talks will take place at the beautiful Hyatt Regency San Antonio, which is situated just alongside San Antonio’s famous Riverwalk.

In Friday’s session, “The Growing Technology Influence in Detecting Mortgage Fraud,” I’ll be joined by REIPA’s Collateral Assessment and Technologies Committee. Together, we’ll explore how technological advances are being incorporated into early detection of potentially fraudulent mortgage transactions.

For Saturday’s session, “Housing Investment Fear Factor,” I’ll be using housing sales and MLS inventory statistics to explores the real-world possibilities of a major economic downturn and what impact it may have on buying and selling real property. Should you be buying or selling? Come to this session to find out.

Again, for more information on the Joint NPRRA-REIPA Conference, click here. In the meantime, if anyone would like to talk with me beforehand about either of my presentations, feel free to leave a comment below.