Mortgage Fraud Crack Down On High Gear

Although the topic of mortgage fraud may not be everyone's dinner table conversation or the hot topic of the day, but the Feds are pouring resources into mortgage fraud crackdowns and oversight. Various federal agencies such as the FBI, Justice Department, Secret Service and the US Post Office have received a combined $500 million in new funding to investigate and convict individuals and companies engaging in mortgage fraud. Could this amount to one of many knee jerk reactions to a meltdown in various financing and real estate markets? What do you think?

With every catastrophic event politicians are motivated to pass either a series of funding initiatives or bills in reaction or over reaction to the event. Taken by itself there always seems to be good arguments supporting such initiatives; however, over time the cycle swings either towards to much government intervention or towards more market control. Striking a healthy balance between government oversight and to much government intervention remains an enigma for our country to manage. In the current recession, we are trending towards significant government intervention that offers significant bailout funds for large corporations and government agencies; however, the homeowner remains left with few options. So when a person is faced with refinancing a problem loan or acquiring a home due to significant underwriting changes adopted over the past 18 months, application fraud becomes a tangible issue. I'm not trying to justify the fraud or any semblance of fraud; however, maybe we should look to the core of the problem and attempt to solve it. So what is the problem?

Well one needs to look at supply and demand forces in the market. Buyers looking for homes or owners looking for new loans look to financial institutions for solutions. The channel of brokers, bankers and financial institutions profit by funding loans. So look at the type of loan programs offered and set achievable underwriting criteria that provides a competitive flow of funds into the market. Then motivate the channel of mortgage brokers, bankers and financing companies to fund loans with borrowers that achieve realistic underwriting goals at rates and terms that will keep the market from imploding in the next real estate cycle. For example providing 100% or 105% loans for purchase or refinances is only inviting fraud and future market busts. At the same time forcing a borrower to have a perfect credit file and still delay funding (so that 30 and 60 day loan locks are expiring) by creating a bureaucratic paper nightmare is not the solution either. Some where in this mess is a solution that must be found balancing the needs of the homeowner by providing real solutions (that actually find their way to the borrower) with the needs of the market, financial institutions and Wall Street. Unfortunately until the core of the problem is addressed this pendulum will continue to sway in the winds of political favor offering nothing but false promises of solutions for troubled homeowners and financial institutions alike.

I would be interested in your feedback. Let me know what you think. For additional information on the status of the market visit us at www.coastalcommunityhomes.com.