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photo, Mark Fleming
With the decline in the housing market, "builder bailout" fraud schemes are on the rise, according to the chief economist of mortgage risk management company First American CoreLogic, Sacramento, Calif.
A builder bailout occurs, explained Mark Fleming, when a builder has a lot of inventory and has ended up in a situation where it needs cash for some pressing purpose, such as to repay its construction lines of credit.
In these schemes, in which Mr. Fleming said there are confirmed multiple loan plots involving multiple lenders, the builder works with a mortgage broker. Straw buyers are used to act as "out-of- state" property investors. The loans are usually stated income mortgages.
Affinity fraud is related to the builder bailout scheme. This is a "community of people" known to the perpetrator of the scheme who are willing to help pull it off, he said.
Sometimes a straw buyer is...