Cases prosecuted in the last three years by the US Attorney’s Office in South Carolina have resulted in convictions or plea agreements of over 80 real estate industry insiders according to the latest report by the South Carolina Department of Consumer Affairs. "The State of Mortgage Fraud in South Carolina" looks at mortgage fraud conditions and trends across the state and recommends improvements to protect consumers.

According to the report, The FBI indicated South Carolina is one of the “Top Ten Hot Spots” for mortgage fraud. Additionally, the report shows that the foremost occupations for the fraudsters as finance related, including mortgage brokers, lenders and their employees. The types of fraudulent mortgage loan activity reported included falsification of the loan application, identify theft/fraud, misrepresentation of loan purpose or misuse of loan proceeds, appraisal fraud, fraudulent flipping of property and fraud involving multiple loans.

The report states that mortgage lenders and their originators are basically unregulated within the state of South Carolina. There is no oversight by the State. Additionally, first mortgages and junior liens less than 12% have little or no protections for consumers under the Consumer Protection Code. Most mortgages in today’s market are funded and in some cases originated by non-depository mortgage bankers, who in most cases are only regulated by the individual states. In South Carolina, that regulation is missing.

South Carolina has been working with national associations, American Association of Residential Mortgage Regulators (AARMR) and the Conference of State Bank Supervisors (CSBS), to develop a National Licensing System. It is intended to be a web-based licensing application system that would be used by all states and make available licensing and adjudicated actions against a licensee to all states in which a license is sought.

The member states are also working to increase uniformity for licensing and regulation of the mortgage industry. They believe that this initiative will help lessen the burden on the industry as well.

The report states that to effectively prosecute requires a clearinghouse for all suspected mortgage fraud and a coordinated effort to investigate and prosecute the perpetrators, including local, state and national authorities. The SCDCA is working with state and national authorities, including the Attorney General of South Carolina, the FBI, the Secret Service, the IRS, the US Attorney’s Office and HUD in this effort. They have formed a mortgage fraud task force and have started sharing information. They state that they need the assistance of local and state law enforcement and solicitors in the investigation and prosecution of perpetrators. In addition, state and local law enforcement need clear authority and guidance on the crime of mortgage fraud. And finally, the SCDCA needs the law changes previously identified to assist in enforcement actions and identifying the fraudsters.