Mortgage fraud generally involves a material misstatement, misrepresentation or omission relied upon by an underwriter, or lender to fund, purchase or insure a loan. Participants in various mortgage fraud schemes can include engineers, appraisers, accountants, attorneys, real estate brokers, mortgage underwriters and processors, title company employees, mortgage brokers, loan originators and other mortgage professionals.
The FBI, IRS and other federal law enforcement agencies have formed Operation Malicious Mortgage, which is a nationwide initiative targeted at reducing mortgage fraud. The frenzied real estate market prior to its recent implosion was rife with fraud and abuse, which now has become vividly clear. The government’s role in the real estate market, through the Department of Housing & Urban Development and its Federal Housing Administration, results in much of the mortgage fraud that has occurred being a fraud on the government as well.
The Fraud Enforcement and Recovery Act of 2009 has made it illegal to make false statements on mortgage applications and appraisals, while expanding the definition of “financial institution” to ensure it includes mortgage lending businesses. When the government ends up insuring mortgages, based on fraudulent information, or otherwise being responsible as a guarantor on mortgages that were fraudulently transacted in any way, then the False Claims Act provides a means of recouping those funds.
In a report issued by the Inspector General, FHA Title II insured manufactured housing loans that closed from 2003 through 2005, at least 50,000 (or more than 80 percent of the financed homes) were installed on substandard foundations. This occurred because current FHA controls cannot be relied on to ensure installers follow required guidelines. Of the 102 properties inspected, 73 did not have adequate piers, 45 did not have reinforced concrete footings, 51 did not have adequate anchorage. The Guide requires manufactured housing units to be permanently attached to the foundation by anchorage devices adequate to resist all loads, including resistance to ground movements and uplift caused by wind, earthquake, etc. under the piers.
You can be negatively affected when obtaining an FHA-insured loan for your manufactured home if it has a substandard foundation. For example, the home is likely to be overvalued and the mortgage over insured. This will also cause problems selling the home to potential buyers seeking an FHA-insured loan and would cause financial detriment to the sellers because the pool of potential buyers is significantly reduced if buyers are unable to obtain an FHA insurance loan.
FHA instructions do not require the engineer’s certification to be accompanied with the actual engineering calculations that prove the foundation is compliant. As a result, unscrupulous engineers have been signing off on certifications on substandard foundations without the actual engineering being performed.
You can avoid becoming a victim of fraud simply by demanding to see the engineering calculations that the certification was based on. If it cannot be provided, contact another lender.
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