Mortgage fraud is a real problem in today's economy because billions of dollars are being lost by investors and consumers alike, many losing their homes to foreclosure, along with their life savings.
According to the FBI, "mortgage fraud is one of the fastest growing white collar crimes in the United States."
The victims of mortgage fraud are borrowers, people who have a need to sell their property, banks and mortgage companies, the government, and the economy as a whole.
It doesn't just end with homes and money, mortgage fraud can take a toll on a person's mental and physical health, causing anxiety, depression, heart attacks and strokes, and other stress related illnesses.
In mortgage fraud situations, sometimes borrowers may be unwitting victims, but some are aware and understand that fraud is being committed. If they participate willingly, they are guilty of a serious crime.
Whole neighborhoods may be affected by mortgage fraud due to artificially inflated prices. This may seem like a good thing at first because of the high equity buildup in the short term, but in the long term, residents will find it harder to sell their property because of the inflated prices which in turn may cause a decrease in value.
Lenders may end up having to foreclose on properties, thereby taking a loss if they have to sell the property through a short sale for less than it's worth. Lender's may be plagued with the high costs of foreclose and they may take a loss if the borrower files bankruptcy to stall the foreclosure. The lender also has to pay rehabilitation costs if the property is damaged, commissions to real estate brokers or attorneys, appraisal costs, and title and escrow fees.
Mortgage fraud in itself is destructive to the economy, but what makes the biggest impact are the numbers. With so many homes going into foreclosure, it causes consumer confidence to drop causing a reluctance to buy homes or other big ticket items.
This event causes a widespread disruption in the homebuilding industry, which in turn affects all related industries and businesses, which in turn usually causes the economy to go into a mild, or in some cases, a severe recession.
In a broader sense, everyone is victimized by mortgage fraud. Mortgage fraud has wide ranging affects on the economy that may cause layoffs, bankruptcies, foreclosures, and in the end, it touches everyone in one way or another.