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Notary Bulletin

FBI-Collusion, Fraud On The Rise In Real Estate Transactions

With the housing market still reeling from the impacts of robo-signing, the mortgage industry is now experiencing a surge in another form of fraud — collusion. Investigators are seeing a dramatic increase in secret agreements made between one or more parties with the intent to defraud others of their property or investment in real estate.

The FBI’s Financial Crimes Report for Fiscal Year 2010-2011 reveals that a higher percentage of mortgage fraud today involves collusion by industry insiders such as bank officers, appraisers, mortgage brokers, attorneys, loan originators and others. In fact, since 2007 the FBI’s “Suspicious Activity Reports” involving collusion have doubled to over 93,000 instances. Notaries are increasingly being caught up in these schemes, whether unwittingly or as an active participant, exposing them to severe liability and criminal consequences.

Some of the fraudulent acts have included identity theft or an undisclosed relationship between the borrower and the seller, particularly when property has been transferred at a loss between relatives or known associates. In one case, an appraisal company that issued inflated value reports was owned by a couple with the same last name as the seller of four of the properties.

The increase in this deceptive practice highlights the need for greater diligence by all parties in the industry, including vendors and their employees, as these relationships are difficult to uncover. And at some point in the process, these fraudulent transactions will contain documents that require notarization. A thorough verification of the signers’ identities is one method of deterring those attempting to commit a fraudulent real estate transaction.

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