Subprime Mortgage Loan Scams

Imagine landing your dream home with a subprime loan and an adjustable rate mortgage. A few years later, when interest rates rise, you find yourself unable to afford the payments. You see an ad for a company that promises to help by covering your mortgage for a small monthly fee while you get back on your feet. Unfortunately, it turns out to be a scam—the con artists just take your money and disappear.

This scenario is part of a larger wave of frauds and schemes plaguing the financial services industry, especially within the realm of mortgages and subprime loans. These scams are costing billions of dollars annually and affecting millions of homeowners.

The Federal Reserve has stepped in to address the crisis, attempting to bail out mortgage companies and investigate fraudulent activities. Criminal charges are being pursued against companies involved in falsifying records, lending to unqualified buyers, and misleading investors.

The US government is focused on tackling these financial crimes, with proactive initiatives and collaboration between government agencies and private sector partners. Currently, investigations are underway into 14 corporations involved in subprime lending as part of the Subprime Mortgage Industry Fraud Initiative. These companies range from mortgage lenders to investment banks that bundle loans into securities. There are also probes into insider trading by some executives.

Traditional mortgage fraud is also on the rise. For instance, one state alone has over 1,200 open cases of fraud for profit, involving schemes where properties are purchased with false information and then flipped or allowed to go into foreclosure. Key hotspots include California, Texas, Arizona, Florida, Ohio, Michigan, and Utah.

The number of suspicious activity reports related to mortgage fraud has surged from 3,000 in fiscal year 2003 to 48,000 in fiscal year 2007, with projections for over 60,000 reports this year.

A notable case involved Parish Marketing, a Minnesota homebuilder, whose owners, along with a bank officer and other accomplices, pled guilty to a $100 million mortgage fraud scheme involving around 200 homes.

If you're a victim of subprime mortgage fraud, contact your bank to explore any available programs that may help alleviate your situation.