MBA Recommends No New Mortgage Fraud Legislation
By Foreclosure-Fighter staff writer
If yours is like many families facing foreclosure because of the downturn of the housing market, mortgage fraud played a role at some point during your borrowing process. Now, whether your adjustable rate mortgage has reset or a fraudulent appraisal landed you an inflated house price in the first place, you're probably wondering what you can do to save your home.
A study recently published by the Mortgage Bankers Association (MBA) suggested that no new legislation is needed for handling mortgage fraud, a position that might shock or worry homeowners just realizing fraud played a role in their home purchase.
To understand the MBA's assessment of mortgage fraud laws, it's important to first understand exactly what mortgage fraud is and who it affects.
The MBA's report defines mortgage fraud as any form of deceit on the part of the borrower that leads the lender to provide a loan when it wouldn't have done so had correct information been given. Keep in mind that intermediaries and conmen can also be responsible for mortgage fraud, by misleading borrowers about the terms of their loans or incorrectly reporting borrowers' information.
Mortgage fraud can be used to obtain a house or a profit, but is illegal in either case. The MBA's report suggests that fraud of this nature is being committed at an "alarming" rate, with instances of suspected fraud having increased steadily over the last few years.
Many schemes that were common during the housing boom a few years ago were examples of mortgage fraud. But the report makes a distinction between fraud and predatory lending.
Predatory lending, according to the MBA, usually hurts the borrower directly, and is different enough from mortgage fraud that the two should be kept separate for legislative purposes.
So who does mortgage fraud affect, and why does the MBA suggest limiting new legislation concerning it? Initially, mortgage fraud harms the mortgage lenders. The study cited FBI statistics that estimated that mortgage fraud cost lenders between $946 million and $4.2 billion solely in 2006.
Eventually, those costs trickle down to homebuyers, who end up spending more money for their home loans. Also, according to the study, foreclosures and delinquencies often result from loans obtained using mortgage fraud, which means that homeowners with nearby properties see decreased property values.
Why then does the MBA recommend no new legislation to prevent mortgage fraud? Because, the study shows, new laws will come with new ambiguities, new problems, and new interpretations. Rather than penning new regulations, the MBA believes more funding should be allocated to enforce existing laws, which it feels are sufficient to prevent and prosecute mortgage fraud.
The MBA, it should be noted, has a specific interest in the mortgage banking industry, and not in the wellbeing of individual homeowners.