Kimberly Miller, Palm Beach Post
Florida retained its top ranking in the nation for mortgage fraud litigation through September as millions of dollars in bad boom-time loans continue to be discovered by law enforcement and lenders.
A report released Tuesday by industry publication Mortgage Daily showed that Florida’s activity during the third quarter included more than $144 million in suspect loans that were questioned in court.
Florida has held the lead on the index, which tracks such activity as indictments and guilty pleas in criminal and civil cases, since the first quarter of this year.
California ranked second on the activity index, but with more than $204 million in allegedly fraudulent loans, it came in first based on dollar amount.
Mortgage Daily founder and publisher Sam Garcia attributed some of today’s fraud cases to a review of loans written during the frenzied ascent to the 2008 real estate crash. Investors continue to pressure banks to buy back mortgages that didn’t meet underwriting standards or were bogus for other reasons, such as falsification of the borrower’s income.
Last year, Bank of America bought back $2.87 billion in bad mortgages from federal mortgage backers Fannie Mae and Freddie Mac.
The buybacks can cause a domino effect, Garcia said, as larger banks turn to loan originators or smaller companies to hold someone accountable.
“For a long time there just wasn’t much prosecution,” Garcia said. “Then we were just inundated. People who had committed fraud could no longer cover it up when the market turned bad and it became clear that loans were made that shouldn’t have been made.”
Nationwide, the mortgage fraud index climbed 16 percent in the third quarter, compared with the same time in 2010, with cases totaling more than $1.3 billion in questionable loans.
