State takes steps to improve its efforts to curtail mortgage fraud

Just a few short years ago, two studies showed South Carolina among the nation’s leaders in cases of mortgage fraud. Mortgage fraud is one of the fastest-growing crimes in the United States, according to the S.C. Department of Consumer Affairs’ 2007 Mortgage Fraud Report.

According to the June 2004 Mortgage Asset Research Institute Inc. mortgage fraud case report, South Carolina ranked fourth among states with the highest mortgage fraud scores. The Palmetto State surpassed both California and Florida, both of which for more than three years topped the list. Fast-forward to nearly four years later, in March 2008, and South Carolina’s no longer on the list.

South Carolina was ranked No. 1 for mortgage fraud in 2001, according to the FBI’s Mortgage Fraud Report. But in the most recent report, in 2007, the state fell out of the top 10, coming in at No. 22.

In that latest report, the FBI also identified South Carolina as one of the top 10 “hot spots” for mortgage fraud in the United States.

And “South Carolina has directly and disproportionately been targeted for this type of fraud,” S.C. Attorney General Henry McMaster said.

With this in mind, the S.C. Department of Consumer Affairs and the state Attorney General’s Office launched the state’s first mortgage fraud hotline June 10. The toll-free Stop Mortgage Fraud hotline is (800) 553-7723. It is staffed from 8:30 a.m. to 5 p.m. weekdays.

People also can call the hotline to have their questions about fraud or anything dealing with home mortgages and foreclosures answered.

Carri Grube Lybarker, a staff attorney with SCDCA, said the hotline is meant to be a “resource for people, because about 20 percent of foreclosures have some sort of mortgage fraud attached to them.”

In addition to the hotline, South Carolina residents can report mortgage fraud by filing a formal complaint with the state Department of Consumer Affairs. The complaint form can be found at http://www.scconsumer.gov/mortgage_fraud/complaint.

Mortgage fraud is committed if a person intentionally or knowingly makes a materially false or misleading written statement to obtain a mortgage loan. Concealing a second mortgage from a primary lender and concealing or stealing a borrower’s identity also are forms of mortgage fraud. Mortgage fraud cases prosecuted by the U.S. Attorney’s Office in South Carolina from 2005 to 2008 resulted in convictions or plea agreements of more than 80 people.

But ultimately, SCDCA Agency Administrator Brandolyn Thomas Pinkston said, everyone pays for it.

“Homeowners and homebuyers pay directly through increased costs for mortgages and higher property taxes as fictitious appraisals and property flips increase property values,” she said. “Indirect costs include taxes and lender costs to fight and/or prevent such crimes.”

Mortgage fraud is expected to continue as more and more people face foreclosure. But efforts like the new hotline can help people keep the homes they’ve worked so hard to buy.