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Survey: Arizona ranks 7th for mortgage fraud

Arizona has moved from 23rd to seventh in the ranking of states with the greatest amount of mortgage fraud, according to data from the nation’s largest lenders.
It’s the highest Arizona has placed on the Mortgage Asset Research Institute’s annual fraud survey, which is based on the number of mortgage fraud cases per total of state home loans.
Arizona saw the biggest jump in mortgage fraud from 2005 to 2006 largely because of a wave of cash-back deals last year.
The deals involve getting a loan for more than a home is worth and pocketing the extra cash.
It’s a scam that inflates home prices in neighborhoods, leaves recent home buyers possibly owing more than their house is worth and can cost lenders millions of dollars due to bad loans.
Metro Phoenix’s overheated housing market in 2004 and 2005 opened the door for cash-back fraud. Then, speculators sparked bidding wars and pushed up home prices. At the time, fraud was committed by investors lying on applications to purchase multiple homes. But the real problems began as the market slowed and investors could no longer quickly flip homes for a big profit.
Groups made up of everyone from investors to real estate agents, loan officers and appraisers began devising schemes to do cash-back deals.
“Really hot real estate markets mask mortgage fraud,” said D. James Croft of the Mortgage Asset group, which tracks fraud for the Mortgage Bankers Association.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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