Mortgage Fraud Research Articles

Scripting mortgage fraud for the motion picture: “Fraud and its interrelationship with the financial services sector in the UK”

This article examines how mortgage fraud is organised in the United Kingdom, what the crime-commissioning processes are for its occurrence and what exogenous conditions and influences support its existence and its capacity to reproduce. The article aims to extend understanding beyond the micro-individual-level, such as causal agency, the biographies of actors and their social relations with one another; to a level of understanding that encompasses macro-structural and facilitative factors and conditions that exist in the financial services sector. The research strategy is supported by a multiple case study design, which involves the cross-case analysis of three multi-million-pound mortgage fraud conspiracies. The study combines criminology with sociological inquiry that employs Clegg’s circuits of power theory as a conceptual framework to examine how the roles and activities of fraudsters and key professional agents are otherwise supported by the convergence of dispositional and facilitative conditions and influences in the financial services sector. It is this circuit that supports the existence of mortgage fraud and its capacity to reproduce. Crime scripting is used as a means of transposing the circuits of power framework into criminological research, as the schema is representative of the interrelationship of the causal, dispositional and facilitative powers through which the organisation of mortgage fraud is possible.

Technological Perceptions and the Role of AI in Reducing Mortgage Fraud in the Accounting Department of the Savings and Credit Cooperatives of the Bolívar Province – Ecuador

Technological Perceptions and the Role of AI in Reducing Mortgage Fraud in the Accounting Department of the Savings and Credit Cooperatives of the Bolívar Province – Ecuador

Does Internal Control over Financial Reporting Curb Mortgage Fraud?

Does Internal Control over Financial Reporting Curb Mortgage Fraud?

Comparative Study of Fraudulent Activities and Various Fraud Detection Techniques

Abstract: This study highlights the critical role that effective fraud detection systems play by examining the rising occurrence of fraud across industries, which is being driven by technological advancements. By examining a number of fraud categories, such as money laundering, cryptocurrency-related schemes, credit card fraud, and mortgage fraud, this study highlights the need for rigorous preventive measures. By carefully examining a wide range of detection techniques, including Support Vector Machines, Fuzzy Logic, Artificial Neural Networks, Hidden Markov Models, K-Nearest Neighbour, and Bayesian Networks, the research reveals the expanding toolset against fraudulent activity. Through a rigorous examination of applicable literature, creative cutting-edge methods, and astute investigations, the research highlights the crucial necessity of fraud detection systems across a variety of industries. The need for more innovation and interdisciplinary collaboration is highlighted by the discovery of knowledge gaps in real-time data analysis, handling unbalanced datasets, and resilient tactics against adversarial attacks. Our research also contributes to the development of strategies for preventing fraud, ensuring the dependability of financial institutions, and fostering confidence in a time of complex technological connections.

Increasing trust and fairness in machine learning applications within the mortgage industry

The integration of machine learning in applications provides opportunities for increased efficiency in many organisations. However, the deployment of such systems is often hampered by the lack of insight into how their decisions are reached, resulting in concerns about trust and fairness. In this article, we investigate to what extent the addition of explainable AI components to ML applications can contribute to alleviating these issues. As part of this research, explainable AI functionality was developed for an existing ML model used for mortgage fraud detection at a large international financial institution based in The Netherlands A system implementing local explanation techniques was deployed to support the day-to-day work of fraud detection experts working with the model. In addition, a second system implementing global explanation techniques was developed to support the model management processes involving data-scientists, legal experts and compliance officers. A controlled experiment using actual mortgage applications was carried out to measure the effectiveness of these two systems, using both quantitative and qualitative assessment methods. Our results show that the addition of explainable AI functionality results in a statistically significant improvement in the levels of trust and usability by its daily users. The explainable AI system implementing global interpretability was found to considerably increase confidence in the ability to perform the processes focused on compliance and fairness. In particular, bias detection towards demographic groups successfully aided in the identification and removal of bias towards applicants with a migration background.

Asian American-Owned Banks Do Count: No Wrongful Jailing of Abacus Bank

The 2008 financial crisis, described as the worst U.S. economic disaster since the Great Depression, resulted in the criminal prosecution of just one, singular bank: Abacus Federal Savings Bank. This small, family-run community bank based in NYC's Chinatown, catering primarily to Chinese immigrants, never invested in the mortgage-backed securities nor originated the subprime mortgages that were at the root of the financial crisis. Moreover, institutions such as Abacus provide critical services to underbanked populations and support the economic prosperity of minority communities. Yet, the Manhattan District Attorney aggressively prosecuted Abacus Bank with a 184-count indictment. Ultimately, after a four-month jury trial and 10 million dollars in defensive litigation costs, Abacus Bank, a bank deemed "small enough to jail" as opposed to "too big to fail," remains the only U.S. bank indicted for mortgage fraud related to the 2008 crisis. Manhattan District Attorney Cyrus R. Vance pushed the boundaries in his aggressive pursuit of a lowest hanging fruit minority bank. This analysis addresses why Abacus Bank did not attempt to allege selective prosecution to quash the DA's case and also never brought a suit against the government in connection with the aggressive prosecution tactics used by the DA. The Abacus Bank trial still serves as a lesson for prosecutors to understand and use as future guidance in how they should remain aware of cultural context and implicit biases when exercising their discretion in targeting businesses that cater to underserved minority communities.

Asian American-Owned Banks Do Count: No Wrongful Jailing of Abacus Bank

The 2008 financial crisis, described as the worst U.S. economic disaster since the Great Depression, resulted in the criminal prosecution of just one, singular bank: Abacus Federal Savings Bank. This small, family-run community bank based in NYC's Chinatown, catering primarily to Chinese immigrants, never invested in the mortgage-backed securities nor originated the subprime mortgages that were at the root of the financial crisis. Moreover, institutions such as Abacus provide critical services to underbanked populations and support the economic prosperity of minority communities. Yet, the Manhattan District Attorney aggressively prosecuted Abacus Bank with a 184-count indictment. Ultimately, after a four-month jury trial and 10 million dollars in defensive litigation costs, Abacus Bank, a bank deemed "small enough to jail" as opposed to "too big to fail," remains the only U.S. bank indicted for mortgage fraud related to the 2008 crisis. Manhattan District Attorney Cyrus R. Vance pushed the boundaries in his aggressive pursuit of a lowest hanging fruit minority bank. This analysis addresses why Abacus Bank did not attempt to allege selective prosecution to quash the DA's case and also never brought a suit against the government in connection with the aggressive prosecution tactics used by the DA. The Abacus Bank trial still serves as a lesson for prosecutors to understand and use as future guidance in how they should remain aware of cultural context and implicit biases when exercising their discretion in targeting businesses that cater to underserved minority communities.

Ten Years of Evidence: Was Fraud a Force in the Financial Crisis?

This article synthesizes the large literature regarding the role of various players in residential mortgage-backed securities (RMBS) securitization at the center of the 2008–09 US housing and financial crisis. Underwriting banks facilitated wide-scale mortgage fraud by knowingly misreporting key loan characteristics underlying mortgage-backed securities (MBS). Under the cover of complexity, credit rating agencies catered to investment banks by issuing increasingly inflated ratings on both RMBS and collateralized debt obligations (CDOs). Originators who engaged in mortgage fraud gained market share, as did CDO managers who catered to underwriters by accepting the lowest-quality MBS collateral. Appraisal targeting and inflated appraisals were the norm. RMBS and CDO prices indicate that the marginal AAA investor was unaware of pervasive mortgage fraud and ratings inflation, but these factors were strongly related to future deal performance. The supply of fraudulent credit was not uniform, but clustered in certain geographic regions and zip codes. As these dubious originators extended credit to those who could not afford the loans, the credit expansion led to house price booms and subsequent crashes in these zip codes. Overall, a consistent narrative based on substantial research indicates that conflicts of interest, misreporting, and fraud were focal features of the financial crisis. (JEL G01, G21, G28, K42, R30)

When Mortgage Fraud Meets Negligent Solicitors: Illegality Revisited

Comments on Stoffel and Co v Grondona (SC), clarifying the application of the three considerations outlined in Patel v Mirza (SC) to the illegality defence, and an appellate court's role on review, in a claim based on a failure to register documents relating to a land transaction which was allegedly tainted by mortgage fraud. Notes the potential continuing relevance of reliance to the issue of centrality, as part of the proportionality analysis.

Rising mortgage fraud in India - a case study-based analysis of loopholes in existing lending practices

Indian banks are nowadays emphasising on retail lending, through mortgage of immovable properties, which is in turn augmenting asset-backed exposures in their books of accounts, and thereby attempt...

Resurrecting the Monster? Protecting the Market from Unfettered COVID-19 Fraud Enforcement

COVID-19 spread like a wildfire across the globe, and its effects have spread beyond public health and into all facets of society. The pandemic highlighted significant supply chain vulnerabilities in almost every market, especially those for critical health care supplies. The United States has spent trillions of dollars in response to the pandemic, and that spending has already invited significant fraud. The False Claims Act (FCA) will play a major role in combatting this fraud, and the Department of Justice (DOJ) will lead the charge. However, history indicates that aggressive FCA enforcement during and after a crisis risks producing unintended, negative market consequences. The impact of aggressive mortgage fraud enforcement following the subprime mortgage crisis illustrates this risk. Those efforts dramatically shifted the Federal Housing Administration (FHA) lending market, contributing to a large exodus of established financial institutions. Today’s market for critical health care supplies is even more vulnerable and susceptible to this enforcement impact. Therefore, the DOJ must develop an evaluation framework for COVID-related fraud that considers market impact.This article will outline the federal spending response to COVID-19 and the enforcement framework in which COVID-related fraud will be addressed. It will discuss the impact of enforcement on markets, using the impact of mortgage fraud enforcement on the FHA lending market as a historical example. It will conclude by identifying the need for an evaluation framework that considers market impact and will propose evaluation factors and implementation mechanisms to assist in this effort.

Gender and White-Collar Crime: Convenience in Target Selection

ABSTRACT We find support for the idea that gender affects target selection when committing white-collar crime. Based on the theory of convenience, we argue that male and female offenders vary in their perceptions of convenience when considering alternative categories of crime and alternative categories of victims. We obtained data from Utah’s White Collar Crime Offender Registry. Individuals in the state of Utah who are convicted of a second-degree white-collar crime felony or higher are required to register. The categories of crime included from statute HB 378 are securities fraud, theft by deception, unlawful dealing of property by fiduciary, fraudulent insurance, mortgage fraud, communications fraud, and money laundering.

Digital Transactions in Real Estate Marketing

Identity theft and tax fraud have been leading white-collar crimes for over a decade. Emerging trends have seen the rise in white-collar crime to now include deed theft. This type of theft marries identity theft and mortgage fraud, and it is robbing the hopes of many people who aspire to own a home. This whitepaper identifies how deed theft takes place through targeting homes with deceased owners, house flipping fraud and fake forensic auditors. It explores this evolved white-collar crime and its dangerous effects, while also revealing the best ways to mitigate the risk of deed theft. Furthermore, this paper provides the background of the crime and how the crime correlates with identify theft. Gaining control of this issue is challenging due to the existing infrastructure that was introduced in 1920. This leaves few country clerks with any response to the issue surrounding identity theft and mortgage fraud. To mitigate this challenge, devices have been developed to track the behaviour of people to ensure that their residences are not ‘stolen’. Although these solutions are available, few individuals learn about deed theft so that the solutions can be used to protect themselves against it. This whitepaper presents DeedLock as the most effective solution to address the looming challenge of property theft.

Mortgage lending in Ukraine: analysis of influence factors and scammers

This article reveals the concept of "mortgage lending", defines the subject of mortgage lending, determines the percentage of buyers from the total population in the region who bought a mortgage loan in Ukraine and analyzes items related to the concept of mortgage.The work studies the factors that affect the demand for mortgage bank lending in Ukraine. Uneven demand for mortgages in different regions of Ukraine has been revealed. Among the reasons for the decline in mortgage lending, the level of per capita income in the regions of Ukraine was analyzed, the migration of the population was studied, and the cost of one square meter of housing in the regions of Ukraine was determined. The dynamics of the change in the exchange rate of the US dollar against the hryvnia was also analyzed. The US dollar in 2010-2020 was not stable, which became a huge lever in the development of mortgage lending. Graphically shows the change in inflation indices for 2017-2020 in percent. This article examines the dynamics of mortgage loans over the past 10 years and their share in the total loan portfolios of households. Due to this, it is determined that in Ukraine mortgage loans make up only a small share of all loans in general. The concept of "fraud" is also analyzed and its types are defined, in particular those related to mortgage bank lending. Examples of the most high-profile mortgage lending scams in Ukraine are given, such as the Elite Center, Wojciechowski's new buildings, Villa Sofia Residential Complex, and Kotsyubynsky Residential Complex. The most common mortgage fraud schemes are highlighted. Scams have been analyzed in terms of the subjects of fraudulent schemes. Based on the study, the main measures to avoid negative consequences from various parties to the loan agreement were identified.

Liar’s Loans, Mortgage Fraud, and the Great Recession

ABSTRACT This paper contributes to research on misrepresentation in private residential mortgage-backed securities by using new data on losses from foreclosure to estimate higher than expected losses associated with income overstatement and adverse selection in no/low documentation loans, using full documentation loans as a counterfactual. Overall, no/low documentation loans account for $350 billion of the $500 billion lost from 2007 to 2012. No/low documentation loans lost an additional $5200 per loan, implying $97 billion of total no/low documentation losses were higher than expected. I also find underwriting exceptions differentially predict loss by documentation type, which provides evidence consistent with originator-led adverse selection.

Ten Years of Evidence: Was Fraud a Force in the Financial Crisis?

This article takes stock of ten years of academic research by synthesizing the large literature regarding the various players in RMBS securitization at the center of the U.S. housing and financial crisis. Underwriting banks facilitated wide-scale mortgage fraud by knowingly misreporting key loan characteristics underlying mortgage-backed securities. Under the cover of complexity, credit rating agencies catered to investment banks by issuing increasingly inflated ratings on both RMBS and CDOs. Originators who engaged in mortgage fraud gained market share as did CDO managers who catered to underwriters by accepting the lowest-quality MBS collateral. Appraisal targeting and inflated appraisals were the norm. RMBS and CDO prices indicate that the marginal AAA investor was unaware of pervasive mortgage fraud and rating inflation, but these factors were strongly related to future deal performance. The supply of fraudulent credit was not uniform, but clustered in certain geographic regions and zip codes. As these dubious originators extended credit to those who could not afford the loans, the credit expansion led to house price booms and subsequent crashes in these zip codes. Overall, there is substantial evidence that conflicts of interest, misreporting, and fraud were focal features of the financial crisis.

A Relationship Among Neighborhood Traits, Home Sales and Mortgage Fraud: The Atlanta Market Leading Into the Mortgage Crash of 2008

Reports of mortgage loan fraud grew exponentially in the years leading up to the 2008 financial crisis. We examine simple correlates between mortgage fraud and the economic, credit and loan traits within Atlanta zip codes. First, we find that higher home values and lower rates of owner-occupancy lead to higher levels of fraud. Second, we find that mortgage fraud is not correlated with the proportion of nonbank lenders. Third, we find that higher unemployment rates are positively correlated with higher levels of fraud. Finally, we find no correlation between the historic default rate and the prevalence of mortgage fraud.

Extending Research on Neighborhoods and Crime: An Examination of Mortgage Fraud across Chicago Census Tracts

The purpose of this study is to extend research on communities and crime by assessing neighborhood variation in mortgage fraud. We use proprietary data to generate a measure of mortgage fraud for 2005 through 2008 for 793 census tracts in Chicago. We estimate maximum likelihood spatial regression models to assess the impact of tract-level structural variables and lending market characteristics on mortgage fraud. We find that concentrated disadvantage, percent black, and immigrant concentration are associated with greater levels of mortgage fraud. However, the impact of these factors is largely mediated by subprime lending. In addition, we find mortgages purchased by private entities also lead to greater levels of mortgage fraud. Contrary to expectations, changing loan values are unrelated to mortgage fraud. The findings suggest the relationship between neighborhood structural characteristics and mortgage fraud is partially due to a lack of public social control in disadvantaged minority neighborhoods. Future research should build on this study and examine a wider variety of crimes than are traditionally studied at the neighborhood level.

SECTION 61 OF THE TRUSTEE ACT 1925: A JUDICIOUS BREACH OF TRUST?

AbstractThis article is concerned with s. 61 of the Trustee Act 1925. It will analyse the origins, design and modern day operation of the jurisdiction to relieve a trustee from personal liability following a breach of trust. It will revisit the threshold conditions of honesty, reasonableness and fairness and, in the context of mortgage fraud, contend that this exculpatory jurisdiction ought not extend to the bare commercial trust that exists between the mortgagee and its solicitor. Defects, uncertainties and shortcomings associated with s. 61 will also be addressed.

Illuminating a Dark Side of the American Dream: Assessing the Prevalence and Predictors of Mortgage Fraud across U.S. Counties

Using novel county-level data, the authors document that nearly 25% of residential mortgage loans originated between 2003 and 2005 in America contained one or more indications of mortgage fraud but also that rates were highly variable across counties. Multivariate regression models reveal that rates of mortgage fraud were higher in areas with greater loan volumes, a larger share of loans originated by independent mortgage companies, elevated rates of preexisting property crime, and higher levels of black-white racial segregation; it was less prevalent where government-sponsored enterprises purchased a larger share of the loans sold in secondary mortgage markets. The findings are most consistent with classic and contemporary anomie theories and perspectives that highlight the geographic targeting of selected housing markets with loan products and tactics that provided fertile ground for mortgage fraud. The authors discuss the implications of these patterns for developing a more comprehensive understanding ...