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ABSTRACT
Mortgage fraud, a white-collar crime committed against lending institutions, has grown tremendously over the past few years across the United States. Mortgage fraud has community implications, and does not follow traditional categories of white-collar crimes, which usually are limited in the types of victims affected. Because of the negative externalities that emanate from neighborhoods hit by cases of mortgage fraud, the ramifications of this crime have long-lasting and harmful effects for multiple parties, in terms of quality of life and financial hardship. This paper explains the implications that mortgage fraud can have on both affected neighborhoods and public administrators. Future research opportunities are also addressed regarding this complex phenomenon. Finally, a brief list of recommendations addresses the challenges brought on by mortgage fraud.
INTRODUCTION
Mortgage fraud is a white-collar crime that has been a steadily growing problem over the past few years across the country (Mortgage Asset Research Institute, 2006). It is a crime whereby property values are artificially inflated in order to fraudulently remove funds from the property's equity. When mortgage fraud occurs, one or more parties knowingly make deliberate misstatements, misrepresentations, or omissions during the mortgage lending process.2 While the cost of mortgage fraud is not fully known, one reasonable estimate incurred by the industry approached one billion dollars in Fiscal Year 2006 alone (Sharick, et al, 2007).
In the vein of criminal justice literature, it has been stated that not much is known about the victims of white-collar crime, such as mortgage fraud (Trahan, Marquart, & Mullings, 2005; Van Wyk & Mason, 2001). This paper intends to not only describe the mortgage fraud process, but also explain its implications for both neighborhoods and local government operations, specifically in the areas of the provision of affordable housing, municipal service costs, and long-term effects on the tax base. The article will conclude with recommendations and suggestions for future research and community solutions to the problem.
DESCRIPTION OF MORTGAGE FRAUd
Overview
Mortgage fraud is generally divided into two broad categories: "fraud-for-property" and "fraud-for-profit." Fraud-for-property schemes usually involve the "material misrepresentation or omission of information with the intent to deceive or mislead a lender into extending credit that would likely not be offered if the true facts were known" (Financial Crimes Enforcement Network,...