The New Yorker has dubbed Florida “The Ponzi State” and “ground zero of the national foreclosure crisis.” Last year, Fort Myers and Cape Coral had the highest foreclosure rates of anywhere in the entire United States.

The first part of this decade saw unmatched growth in the Florida real estate market. Home values in Tampa rose 28% in 2005 alone. “Flipping” properties became so profitable and so easy that a whole new industry was born. People flocked to Florida for the sunshine, the beaches and the absence of income tax, especially as Baby Boomers began to reach retirement age. With infrastructure, schools and vital services funded by bonds based on projection for future growth (thus, the “Ponzi scheme” analogy), Florida communities were rocked hard at every level when the bottom finally fell out.

While the current real estate/mortgage bust in Florida and the rest of the country has its roots in a lot of areas, one, for sure, is mortgage fraud. With lending institutions willing to finance properties to the tune of 100% or more of their values and the demand for mortgage financing so high, it seems now that rampant mortgage fraud was inevitable.

The New Yorker tells a story of a Tampa tattoo parlor owner who made millions of dollars in real estate during the boom. He allegedly purchased properties, then flipped them for inflated prices to “straw buyers” who were financed (no money down) by large mortgage lenders who did very little to verify anything about the borrower. The flipper then gave the “buyer” a cut of the lender’s money. The “buyer” disappeared – never moved in, never intended to pay back the mortgage. The lender then foreclosed and was stuck with a house not worth what the “buyer” paid. And that is mortgage fraud. Or, at least, it’s one type of mortgage fraud.

According to a recent Mortgage Asset Research Institute study, the most common types of mortgage-related misrepresentations in the Tampa Bay area are fraudulent or inflated appraisals, flip sales like those described above. Among the different types of mortgage fraud, the study found that Florida had higher percentages than other states in asset and debt misrepresentation on the loan applications, verification of employment fraud, appraisal misrepresentation and escrow and closing document misrepresentation.

The state of Florida leads the nation in mortgage fraud. The Tampa Bay area newspapers have daily accounts of new mortgage fraud cases filed by federal prosecutors. Real estate developers, speculators (flippers), straw buyers, title agents and mortgage brokers are all included in recent Tampa mortgage fraud indictments. Even attorneys are finding themselves in trouble.

The increasing number of mortgage fraud investigations and charges in Tampa, St. Pete, Clearwater and surrounding areas are bound to keep Tampa Bay federal defense attorneys, especially those who have experience defending white collar crimes, busy for quite some time to come.

Also See:

• FL Lawyer Guilty in Mortgage Fraud Scheme

White Collar Crimes

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