In the wake of the housing market collapse, millions of borrowers defaulted on their mortgages and subsequently entered the foreclosure process. This development led to a number of desperate households agreeing to many initiatives that promised to help keep their properties. Unfortunately, this made the mortgage industry a hotbed for foreclosure relief fraud.
During the first half of 2012, there were close to 2,360 incidents of foreclosure-related fraud reported the the Financial Crimes Enforcement Network.
"If this current pace continues, the total number of foreclosure-rescue scam SARs for the calendar year will far exceed the total of 2,782 reported in 2011," FinCen said.
Meanwhile, incidents of potential mortgage fraud declined 41 percent from a year earlier to 17,476, the agency said. Of this total, an estimated 8 percent included foreclosure rescue scams.
On a state-by-state basis, property data indicates California had the largest number of foreclosure relief scams reported during the first half of the year. This trend was consistent with past findings, as the Golden State had one of the highest foreclosure rates following the real estate bubble burst.
Law enforcement agencies curbing mortgage fraud
The decline in incidents of foreclosure-related fraud could be the result of law enforcement officials cracking down on offenders.
Most recently, the Department of Justice and Federal Bureau of Investigation successfully charged 530 mortgage fraudsters who accounted for nearly $1 billion in losses from financial institutions and distressed borrowers.
"We recognize the negative impact that mortgage fraud and foreclosures have on our economy and on our communities," said FBI associate deputy director Kevin Perkins. "We cannot merely investigate after the fact."
The year-long effort revealed that more than 73,000 borrowers fell victims to fraudulent schemes which offered mortgage modifications for a fee. In turn, many of these borrowers end up losing the titles to their properties and much of their savings.
This development was part of an effort known as the Distressed Homeowners Initiative. It's the hope of the FBI, DOJ and an array of other agencies and organizations that this could put an end to mortgage fraudsters taking advantage of desperate households once and for all.