Occupancy Fraud Risk on the Rise
June 2nd, 2011
More real estate investors than ever are lying in order to buy houses, according to a recent Fraud Risk Report from Interthinx [1]. According to the report, occupancy fraud risk, which means that the borrower claimed to live in a home in order to get a mortgage or get better terms on a loan, was up 25 percent in the first quarter of 2011. Additionally, there was a dramatic rise in employment/income fraud risk, with five metropolitan statistical areas (MSAs) showing increases in this risk sector of more than 70 percent [2]. Employment/income fraud involves providing misleading information about one’s employment or income.
“Risk is becoming more prevalent across the board,” said Kevin Coop, Interthinx president. He advised lenders to adhere to “strict prefunding fraud detection policies…to keep fraudsters at bay” [3].
Given how important it is to get houses off the market, do you think that lenders should ease up on occupancy requirements?
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Let us know what you think about occupancy fraud – is it really a problem as long as people are buying the houses? – in the space below.
[1]http://www.housingwire.com/2011/06/01/interthinx-risk-index-shows-occupancy-fraud-rose-25-in-1q
[2]http://nationalmortgageprofessional.com/news25396/occupancy-fraud-rise-nationwide-according-new-interthinx-report
[3]http://www.businesswire.com/news/home/20110601005688/en/Report-Reveals-Disturbing-Jump-Occupancy-Fraud-Risk
June 2nd, 2011 at 7:22 AM
Well the occupancy issue is so yesterday,more likely home will be occupied but by renters,and the rates should be closely correlated the same as a owner occupied,just keep the down payment a little higher so the investor does have some of their own money at risk and possible make a change to the time allowed to forclose and take the house back and get the rent ganishment as part of the mortgage paper work at the initial underwriting ,as well as a a 60 day notice as with most private contract for deeds.Theres much more that could be done to safeguard the lenders and the borrowers.
June 2nd, 2011 at 7:48 AM
Yes, lying about occupancy in order to buy a property is a problem. Healthy and sustainable commerce must be built on integrity. If a person will lie to get a house, it begs the question: What other things may be lied about? Intention to make payments? Ability to make payments?
June 2nd, 2011 at 9:30 AM
Occupancy fraud has the highest risk of foreclosure, which would result in a loss to Fannie Mae/Freddie Mac of FHA/VA and the American Public, because the FEDS now own those agencies. The other most heinous mortgage crime, are those investors who took some real estate course and purchase several properties at the same time and do not tell any of the lenders. They are also in a high risk of foreclosure. Successful RE investors operate by the rules, not by fraudulent acts against the country that the property is in! It causes the whole system to back up and act ugly, oh gee! Like now. A recession!
June 2nd, 2011 at 6:28 PM
Give me a break! if there really is this so called “occupancy fraud”, it’s only because the borrower can’t sell their damn property for a fair market value with all the foreclosures bringing the market down so they have to get a better rate!!!!