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Last week, FBI Director Robert S. Mueller, III, made a statement about the “Priorities in the FBI‘s Criminal Programs” before the Senate Judiciary Committee.  One of the topics he covered was mortgage fraud.

Mueller reported that there has been a drastic increase in the number of mortgage fraud cases in 2009 due to the upheaval in the housing market.  Last year, there were approximately 1,600 cases of mortgage fraud, but this year, there are more than 2,600 cases pending, an increase of more than 62%.

Most identified fraud cases involve large losses — typically more than $1 million.  And in many instances, the fraud is facilitated by industry insiders.

So what is the FBI doing about it?

• They are focusing on industry insiders to identify potential facilitators of mortgage fraud.
• They have assigned approximately 300 special agents the task of investigating mortgage fraud
• They partnered with several federal, state, and local law enforcement agencies to establish 15 Mortgage Fraud Task Forces and 59 Working Groups in areas across the country that have been identified as high risk for mortgage fraud.
• They participate in coordinated law enforcement sweeps targeting mortgage fraud.  A recent 3-month effort, called Operation Malicious Mortgage, resulted in 144 mortgage fraud cases with more than 400 defendants charged with losses of approximately $1 billion.

How does the FBI go about identifying mortgage fraud?

• They “employ statistical correlations and other advanced computer technology to identify patterns in the search for companies and persons engaged in activity that is indicative of fraud.”
• They work directly with the mortgage industry to identify mortgage fraud and educate the public about mortgage fraud.

If you read or listen to the news, you have probably heard many reports about mortgage fraud during the past year or so.  It’s good to know that efforts are being stepped up to do something about it.

Today, the Making Home Affordable Modifications report card for the month of August was released by the Treasury Department.

The report shows that loan servicers have extended offers for 571,354 trial modifications, and 360,165 homeowners have begun the process of modification.  In July, mortgage servicers committed to modify more than half a million mortgages by November 1, 2009.  These latest numbers show that they are on their way to meeting that goal. 

Most loans are now covered by the program.  More than 45 servicers have signed up for the Home Affordable Modification Program, including the 5 largest.  Loans covered by these servicers and loans owned or guaranteed by government-sponsored enterprises account for more than 85% of loans in the country. 

Page 2 of the report shows the trial modification activity by servicer, summarized below:

While progress has been made, still only 12 percent of U.S. homeowners eligible for loan modifications have had their mortgages reworked, while 19 percent of eligible borrowers were offered trial modifications, up from 9 and 15 percent in the previous report, respectively.

The government points out that the Home Affordable Modification Program has its limits.  When home values were increasing a few years ago, there were still hundreds of thousands of foreclosures.  So even if the program is a complete success, we should still expect some foreclosures to occur, because some borrowers do not qualify for the program, while others bought homes well beyond what they could afford and are unable to make the monthly payment even on a modified loan.

Visit the government’s official website to determine your potential eligibility in the Home Affordable Modification Program, or call 1-888-995-4673 to receive direct information and assistance in applying for the program and reach a HUD-approved housing counselor.

Please join me in welcoming Joanne Gaskin as the newest contributor on Mortgages Unzipped.

Joanne is the Director, Global Scoring Solutions of FICO, responsible for the strategic direction of product and alliance partnerships within the mortgage lending vertical.  Prior to joining FICO, Joanne was a Senior Segment Manager for Wolters Kluwer Financial Services where she was responsible for the development of compliance solutions for the mortgage market segment. Joanne has spent more than 20 years working with financial institutions on many of the most important topics impacting the mortgage industry today, including regulatory compliance, credit risk management, data security, emerging markets and e-mortgages.  Joanne has a number of interests outside of work but is especially passionate about cheering her son and his championship soccer team to victory.

We look forward to reading your future posts, Joanne!

Please join me in welcoming Ken Perlmutter as the newest contributor on Mortgages Unzipped.

Ken founded Chicago-based PERL Mortgage in 1994, and over the past 15 years, has led PERL to become an industry leader.  A regular contributor to national media outlets, Ken believes that honest, ethical treatment of his clients and employees — and continually evolving in an ever-changing industry — will reap the greatest returns.  In his spare time, Ken enjoys golf and traveling with his family.

We look forward to reading your future posts, Ken!

Mortgage rates quoted to borrowers on Zillow Mortgage Marketplace have dropped significantly over the past few days.

Since rates displayed in Zillow Mortgage Marketplace rate charts and graphs are averages, it’s best to find out the exact rate for which you qualify.  You can do this by anonymously requesting custom mortgage quotes from thousands of lenders on Zillow. 

Learn more about our rates, or get e-mail alerts when mortgage rates drop.

Renae Merle of The Washington Post recently reported that unemployment has overtaken subprime mortgages as the primary reason for foreclosures.  Currently, the majority of those seeking help with their mortgages say unemployment is the primary reason for being deliquent, while those who blame subprime loans has fallen significantly.  And, prime loans now account for a greater share of foreclosures than subprime loans.

Unfortunately, it is much harder to help those who have lost their jobs than those whose loans have reset at higher interest rates.  Deliquencies due to subprime loans can often be fixed by lowering the interest rate back down to the original level.  Deliquencies due to unemployment, however, are much tougher since the owner’s source of funds has completely dried up.

While there’s currently not much help for those who lose their jobs, some have started looking more closely at this issue.  Merle points out:

“Several economists at the Federal Reserve Bank of Boston have proposed creating a government lending or grant program for unemployed borrowers, lowering their payments for up to two years while they look for work.” 

This “time out” idea could help up millions of homeowners, but it would come with a hefty pricetag of $25 billion annually.

What do you think?  What are some other ideas to help unemployed people prevent facing foreclosure?

Last year, the Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act of 2008 was signed into law as part of the Housing and Economic Recovery Act. This law outlines procedures, requirements, education, testing, and standards for mortgage loan originators. 

Part of the law includes mandatory registration and state licensing of loan originators through the Nationwide Mortgage Licensing System in order to give consumers easy access to a loan originator’s employment history, and any disciplinary or enforcement actions taken against him or her.  This is great news for consumers, since a national registry will help stop fraud, giving regulators the ability to more efficiently track bad actors.

The registry was begun in January 2008 with a handful of states, and to date, 26 states are actively participating, tracking 66,469 individual originators and 11,459 mortgage brokers and lender companies.  An additional 20 states will register by the end of this year.  Three states — California, Pennsylvania and Massachusetts — have not yet passed bills but have legislation pending, and Minnesota is expected to address the issue in 2010.

The law defines a mortgage loan originator as someone who takes an application and negotiates the terms. What hasn’t been decided yet is whether that definition should include servicers and loan modification officers.

The Obama administration met yesterday with mortgage companies who are participating in the Making Home Affordable loan modification program to identify ways to improve and accelerate the program.  They set a goal of initiating 500,000 loan modifications by November 1, 2009.  To date, roughly 200,000 borrowers have been enrolled in three-month trial loan modifications, out of about 370,000 who were offered modifications by mortgage companies.

To help reach this goal, the administration plans to:

1. Publicly report the number of trial modification offers each servicer has extended, the number of trial plans that are underway, and the number of final modifications. The first report is expected to be released by August 4th.
2. Set more specific metrics to measure the performance of the program, such as average borrower wait time for inbound borrower inquiries, the completeness and accuracy of information provided applicants, document handling, and response time for completed applications.
3. Have Freddie Mac audit a sample of MHA modification applications that have been declined, with the goal of addressing weaknesses in the program.

These plans seem to rely on publicly disclosing servicers who are making progress in this program and then comparing them to those who are not.  It will be interesting to see if this type of incentive works to significantly move the needle.

The House Appropriations Committee approved a bill that would extend the temporary conforming loan limits in high-cost housing markets through the end of September 2010.  In February of this year, as part of the American Recovery and Reinvestment Act, the maximum amount for conforming loan limits for mortgages originated in 2009 were extended through the end of this year.  This new bill would extend those limits longer, through September 2010. 

A conforming loan is one that meets the standards of loan guidelines as established by government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae.  Presently, the conforming loan limit in certain high-cost areas of the U.S. have a cap of up to $729,750, depending on location. The cap is 125% of the area median home price and is not to exceed $729,750, except in Alaska, Hawaii, Guam and the U.S. Virgin Islands, where the cap is 50 percent higher than the limits for the rest of the country. To determine the limit in your area, see local area loan limits.

Increasing the conforming loan limits help make larger loans more affordable and easier to obtain.  With lower limits, more loans would be classified as larger “jumbo loans,” which require banks and credit unions to hold the loans on their books.  As a result, jumbo loans usually have higher interest rates, sometimes up to a three-quarters of a percentage point, as seen earlier this year from quotes provided in Zillow Mortgage Marketplace.

The government’s $8,000 first-time home buyer tax credit has been a source of some confusion by those who might be eligible, but aren’t quite sure if they fully meet the criteria.

Now you can take a simple, 5-question quiz to find out if you qualify:

Do You Qualify for the $8,000 First-Time Home Buyer Tax Credit?

The great thing about this new quiz is that it was developed as a widget that you can put on your own blog or Web site.  Just copy and paste the code, and anyone who visits your site can then take the quiz and get instant results.

When you’re done taking the quiz, make sure to check out all of the other real estate and mortgage widgets Zillow offers.  Here are some of the latest widgets that are among my favorites:

• Mortgage I.Q.
• Market Bottom Poll
• Most Expensive Homes