Americas 10 Worst States for Fraud. Is Yours Listed?

Mortgage fraud is increasing nationwide, according to a statement issued Monday, law enforcement and policy makers seem powerless to stop or even reduce it.

Incidents of mortgage fraud perpetrated by industry professionals increased 7% in 2009, after jumping 26% the year before, said the Mortgage Asset Research Institute (MARI), a division of LexisNexis. The worst-hit states include Florida, California, Arizona, New York, New Jersey and Maryland.

The jump in mortgage fraud is a troubling trend, given that it played a big role in setting the housing crisis in motion, with mortgage professionals doing things like listing false income claims for borrowers, and overstating a home's appraised value.

And the statistics may not capture the entire picture, according to Jennifer Butts of LexisNexis Mortgage Asset Research, since fraud isn't usually detected until a loan goes bad.

"We believe that mortgage fraud is significantly understated," said Butts.

Mortgage fraud hot spots Florida was the worst hit state, according to MARI, with a mortgage fraud index reading of 292.

That means the Sunshine State had nearly three times the expected level of fraud given the number of loans issued there. A score of 100 would indicate the state had exactly the amount of fraud expected and a score of 0 would mean no fraud at all.

Although Florida's reading was the highest in the nation, it was still a huge improvement over 2008, when it was 430.

New York was the second worst state for mortgage fraud with a mortgage fraud index reading (MFI) of 217, up 14% from 2008.

California was next at 159 and Arizona was fourth with 158.

New York's second place ranking was primarily due to illegal activity in the New York City metropolitan area.

The Big Apple had the highest rate of mortgage fraud of any metro area in the nation, while Los Angeles came in second and Chicago third.

The report described several types of fraud that were detected most often.

These include so-called "liar" loans, in which mortgage originators knowingly listed false income claims for borrowers; inflated appraisals, in which mortgage loan officers or brokers pressure appraisers to overvalue a home so it would qualify for a bigger mortgage; and false occupancy claims, which is when buyers claim they will live in a home but are actually buying it for investment purposes. This activity wasn't the type you see from true mortgage professions, just a few bad apples.

The nature of fraud has changed somewhat since the housing bust, according to Denise James of LexisNexis Risk Solutions. "New trends continue to emerge," she said.

With the explosion in foreclosures in many U.S. communities, for example, foreclosure rescue scams are proliferating.

One example of this kind of crime occurs when scam artists convince distressed owners to sign over their deeds, which the scammers claim they need to keep the homes out of foreclosure.

The scammers then turn around and sell the homes to straw buyers, financing the sales with inflated appraisals.

They get, say, an appraisal of $100,000 for a house worth $30,000.

When the deal closes, they take the cash and walk away, failing to make any payments. That sticks the banks with properties worth far less than they gave out in mortgage loans.

The growing rate of mortgage fraud could exacerbate the country's foreclosure problem.

The United States is already on course to have more than a million homes lost to foreclosure in 2010, according to RealtyTrac, the marketer of foreclosure properties.

The Collapse of the U.S. Dollar

Learn why the dollar will collapse and who is behind it.

This Week in the News

This week is moderately active in terms of economic news scheduled for release. There are five reports scheduled, but only two of them carry the potential to cause noticeable movement in mortgage rates. Accordingly, there is a decent possibility of seeing a relatively calm week in the mortgage market, assuming that the stock markets do the same.

The week's first data comes late tomorrow morning when the Conference Board will release their Leading Economic Indicators (LEI) for March. This data attempts to measure economic activity over the next three to six months. This is considered to be a moderately important report, so we may see a slight movement in rates as a result of this report. It is expected to show an increase of 1.0%, meaning it is predicting rapid growth in economic activity of the next several months. A much smaller than expected increase would be considered good news for the bond market and could lead to slightly lower mortgage rates tomorrow.

There is no relevant data scheduled for release Tuesday or Wednesday. The next report comes early Thursday morning when the Labor Department will post March's Producer Price Index (PPI). It will give us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond's future fixed interest payments, leading to higher mortgage rates. However, a slight increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for a 0.5% increase in the overall reading and a 0.1% rise in the core data.

Also Thursday, the National Association of Realtor s will post March's Existing Homes Sales numbers. A similar report to this one and actually the week's least important data- March's New Home Sales will be released Friday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts' forecasts, I don't think they will cause much movement in mortgage rates. Both are expected to show increases from February's levels.

March's Durable Goods Orders will be released early Friday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts are calling for an increase in new orders of 0.2%. This would be a sign of slight manufacturing sector growth, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A decline would be considered good news, while a large increase would indicate manufacturing sector strength. The latter could lead to higher mortgage rates Friday.

Overall, look for Thursday or Friday to be the most important day of the week with the PPI and Durable Goods reports being posted. The rest of the week will likely be heavily influenced by the stock markets. If the major stock indexes rally, bonds will likely suffer and mortgage rates will move higher. If stocks extend last Friday's fall, we could see mortgage rates move lower the next few days.

11 Startling Facts that Obama and Bernanke Do NOT Want You to Think About

by Martin D. Weiss

FACT #1: The official national debt now stands at $12.68 trillion — an amount equal to about 88.5% of all the goods and services our economy produces in an entire year.

FACT #2: Contingent obligations for Social Security, Medicare, Medicaid, veterans, and pensions now stand at an additional $108 trillion over and above the "official" national debt.

FACT #3: State, county and local governments are nearly $3 trillion in debt. Many can't pay and will ultimately demand that Washington assume responsibility for that debt as well.

FACT #4: Total federal, state and local government indebtedness now stands at a mind-blowing $123.6 trillion.

FACT #5: Last year, Washington added $1.4 trillion to the debt. In this fiscal year, the Obama administration will add another $1.6 trillion!

FACT #6: In addition to funding the current trillion-dollar-plus deficits, the U.S. Treasury must borrow MORE each year to replace bills, notes and bonds that are maturing.

FACT #7: This record-shattering borrowing by the Treasury has resulted in a Mt. Everest of Treasury obligations being dumped onto the market, which naturally depresses bond prices and drives interest rates higher.

FACT #8: In a desperate attempt to keep interest rates low, the Bernanke Federal Reserve has created $1.25 trillion out of thin air to buy mortgage-backed securities ... another $300 billion to buy U.S. Treasuries ... and yet another $170.6 billion to buy other government bonds — a total of nearly $1.7 trillion in all.

FACT #9: From September 10, 2008 to March 10 of this year, Bernanke increased the nation's monetary base from $850 billion to $2.1 trillion — a 250% increase in just 18 months.

FACT #10: Despite this massive money-printing, the yield on the benchmark 10-year Treasury note has STILL risen by more than one-fifth — from 3.2% to 3.86% — since December.

FACT #11: Because of this massive money-printing, the U.S. dollar has lost nearly 10% of its value in the past 12 months alone.

CONCLUSION: This unprecedented debt crisis is the single greatest threat to your wealth and standard of living in decades.

Pastor and Wife Sentenced in Drug Money Laundering, Fraud

A South Florida minister and his wife were both sentenced to prison for their roles in a $7 million mortgage fraud and money laundering scheme that gained its power through drug trafficking funds.


Pastor Garry Souffrant and his wife Yvonne, both 33, were sentenced in Miami federal court to prison terms of 20 years and 4 ½ years respectively.

Last November, the pair was convicted of conspiring to defraud major banks through the purchase of 32 residential properties throughout several counties in Florida during the height of the real estate boom.

Garry Souffrant, father of three and former pastor of God First Ministries in Miami Gardens, was also found guilty of conspiring to launder drug money.

Souffrant's brother, Miami Fire Rescue Captain Gamaliel Souffrant, 44, was also charged with the crime but was later acquitted.

The couple assisted drug traffickers to purchase homes and luxury vehicles through their family real estate business, Progressive Real Estate of Broward, according to authorities.

The couple acted as straw buyers for the dealers, hiding the source of their funds to purchase the properties.

They also diverted mortgage loans to fund the scheme and their personal expenses.

Garry Souffrant was convicted, following a five-week long jury trial, of 46 counts, including conspiracy to commit mortgage fraud, conspiracy to commit drug money laundering, mail fraud, making false statements to mortgage lenders, bank fraud, bank theft, and receipt of stolen bank funds.

Yvonne was convicted of one count of fraud conspiracy and one count of making a false statement to mortgage lenders.

All of the properties purchased by the couple have been handed over to the lenders, which include Bank of America, Washington Mutual and Wachovia.

This Week in Review

A pleasant surprise in March hiring has pushed up all long-term rates: 10-year Treasurys to 3.94%, and mortgages to 5.25%.

Even better news than the jobs: rates could have gone a great deal higher. Other new data this week were as positive as employment: the ISM survey of manufacturing in March jumped past expectations to the best reading since 2004, a 59.6 reading. The level of industrial activity is still below pre-recession, but improvement is clear.

Rebounding auto sales are pulling all the way through the supply chain from inventory rebuilding to the shop floor to raw materials. Sales were 10.4 million in 2009, and the pace now is 12 million (however, note the average '97-'07: 16.8 million). Hot emerging markets are also pulling exports from our most competitive industries, notably heavy equipment and IT.

All financial markets have been locked in debate for a year, one side expecting a "V" recovery and attendant inflation and rate explosion, the other skeptical of any recovery at all. The traditional hair-trigger for a "V" event, in every recovery for 60 years: the turn in the job market to self-feeding positive. Is this it? Nope.

The most important testimony: the bond market. Yes, it is a semi-closed day, Good Friday, but thin markets tend to magnify surprises, not dampen them. That rates have not rocketed today reflects the eye-glazing detail in the BLS employment stats.

The surprise: non-farm payrolls rose by 162,000 jobs, in line with forecasts for a big jump in temporary census workers; but instead 114,000 of the gain were real jobs, and January and February were revised up to positive ground. This is legitimate good news: at that pace the economy can at least absorb new entrants into the workforce; not enough to absorb the unemployed, but better.

Big print giveth, and fine print taketh away... one-third of the job gain was temp-help, and another 27,000 hired into the loopy, non-productive, healthcare Ponzi scheme. The companion survey of households found little improvement in anything, an additional 414,000 people joining the long-term unemployed in March alone, and "involuntary part-time" growing to 9.1 million.

The toughest single piece of fine print told the tale: wages in March fell. Only .1% percent, but fell. Looking farther back: job losses in recessions prior to 1990 were made good in 15-month Vees; the 1990 recession took 30 months, and the 2002 took 47; we are 27 months into this one, job losses three times as large as the prior two, and might have bottomed. Might. Neither inflation nor recovery is made of such stuff. Nor are good politics or public policy.

Long-run conclusions are inescapable. Beginning with the emergence of China circa 1990, American labor has come under fierce wage pressure. Two bubbles, stocks and housing, sheltered the economy for a time. Today there is no such shelter available, not in "job creation" programs or anything else. The American standard of living has and will modestly decline until we restore global competitiveness.

We will succeed and come out of this. No doubt at all. However, in the meantime, here in the happy quickening of spring, average citizens are angry at their predicament, at government, and at each other. Our politics for 200 years were based on dividing up the spoils of increasing wealth (no other nation can imagine such good fortune!).
Today, the arithmetic of pie-shrinkage is deeply upsetting to us: if you want to keep all that you have, you must take from someone else. That is the root of all of this public anger, fragmentation, and governmental dysfunction. We are not remotely conditioned to the shared sacrifice of our grandparents and parents.

There is no quick fix available, but in that knowledge, and in awareness of the deeply uneven sacrifices in our society, then understanding and patience are our most plentiful and least costly resources. (As sermons go, short is better.)

by: Lou Barnes