Mortgage Informer

MIAMI (AP) — Reported incidents of mortgage fraud grew by 45 percent in the second quarter compared to the year-ago period, as borrowers misstated their financial information to maneuver around tighter lending standards, industry data released Tuesday showed.

Florida properties led the way with about one-fifth of mortgage fraud incidents reported in the second quarter, the Mortgage Asset Research Institute reported. California was second, and Illinois third, the data showed.

Mortgage fraud incident reports had increased 42 percent in this year’s first quarter, compared to the first quarter of 2007.

Both mortgage fraud and late payments are rising substantially, according to separate reports this week.

The percentage of people who are two months behind on mortgage payments shot up in the third quarter from the same period last year, according to credit reporting agency TransUnion LLC. Meanwhile, industry data released Tuesday shows that reported incidents of mortgage fraud grew by 45 percent in the second quarter compared with the year-ago period, as borrowers misstated their financial information to maneuver around tighter lending standards

For the quarter ended Sept. 30, 3.96 percent of people holding a mortgage were at least 60 days behind in payments, compared with 2.56 percent in the 2007 third quarter.

New rules have come into force to stop mortgage lenders becoming the victims of over-inflated property valuations.

From now on, developers and builders must reveal if they have offered buyers incentives, such as cash-backs, fitted kitchens or paid-for legal fees. Lenders are worried these incentives have led to some properties being sold for more than they are worth.

In particular they have been worried about newly built city-centre flats, whose prices have now slumped. The new rules for the conveyancing industry have been issued by bodies such as the Council of Mortgage Lenders (CML) and the Royal Institution of Chartered Surveyors (Rics). They have also been supported by the Law Society of England & Wales, the Home Builders’ Federation, Homes for Scotland and the Construction Employers Federation.

Broker implicated in mortgage fraud scheme pleads guilty.

A Twin Cities mortgage broker charged in connection with a $4.9 million mortgage fraud scheme involving dozens of homes in Minneapolis and one in Golden Valley pleaded guilty today to one count of racketeering just minutes before he was to go to trial, said Hennepin County Prosecutor Tom Fabel.

Donald Walthall, 40, of Anoka, was charged in late 2007 with one count of racketeering and 24 counts of theft by swindle, according to a criminal complaint filed in Hennepin County District Court. He pleaded guilty to one count of racketeering and accepted a 6-year prison sentence, Fabel said.

In addition, Molly L. Heise, an ex-officer of an escrow firm, must pay more than $3.9 million in restitution. Another mortgage fraud mastermind was sentenced to federal prison on Tuesday.

This time, Molly L. Heise, 50, of Chaska, was sentenced to nearly six years behind bars for a money-laundering scheme involving more than $2.5 million from the clients of her real estate closing company, Profile Title and Escrow.

U.S. District Judge John Tunheim sentenced Heise to 70 months in prison and three years supervised release. He also ordered Heise to pay more than $3.9 million in restitution. Personal loan rates hit six-year high.

Widespread FBI probe highlights breadth and scope of lending crime.

The federal government’s multipronged response to the mortgage mess Thursday was intended to send a strong message to lending industry while helping to restore the trust of investors and consumers as the economy remains mired deep in a housing-led slump.

But it remains to be seen how effective that response will be in righting the upended financial markets and protecting home buyers from predatory lenders in the future.