The Mortgage Asset Research Institute ('MARI') released its Ninth Period Report to the Mortgage Bankers Association. The report examines the current state of residential mortgage fraud and misrepresentation in the United States based on participating lenders’ reports to MARI. Some highlights in the report include:

* The number of reports in MARI’s Mortgage Data Industry Exchange (MIDEX®) database pertaining to 2006 originations is approximately 30 percent higher than the number of reports in the 2005 book of business at the same time last year. Additionally, incidents of mortgage fraud are now more evenly distributed across nearly all states whereas, in prior years, reports tended to be concentrated in relatively few states;

* There are changes in the rankings of the states in terms of their mortgage fraud experience, with Florida taking over the top spot. California’s reported fraud had been lower than most would’ve anticipated in the past few years, and some industry experts have suggested that its problems were masked by high real estate appreciation. The recent slowdown in its housing market may explain California’s return to high ranking in this year’s report.

* The most common types of fraud found to date in 2006 originations are in the areas of employment history and claimed income.

MBA strives to be at the forefront of efforts to help lenders detect, investigate and prevent mortgage fraud. At this year’s National Fraud Issues Conference, MBA and the FBI introduced a new Mortgage Fraud Warning Notice. This notice makes clear that mortgage fraud is a serious federal offense with significant consequences for those who commit it. Use of the Notice is voluntary, but MBA strongly encourages lenders to integrate it into any aspect of the lending process that could be susceptible to fraudulent activity. While collaborative efforts such as this demonstrate that the mortgage industry is willing to come together to combat the crime of mortgage fraud against lenders, the recent growth in incidents also demonstrates that more must be done.

MBA has also reached out to legislators, on both the federal and state level, who have either already introduced or are planning to introduce mortgage fraud bills. MBA will continue to advocate that any anti-mortgage fraud legislation should provide law enforcement officials with all the tools necessary to investigate and prosecute those who commit mortgage fraud. To that end, MBA has submitted written requests to the House and Senate Appropriations Committees advocating for $31.25 million over a five year period in dedicated funding for the FBI and the Department of Justice to combat mortgage fraud. We believe this funding could provide 30 new FBI field investigators, two new prosecutors at the Department of Justice to coordinate prosecution of mortgage fraud cases and $750,000 to support the operations of Interagency Task Forces in targeted areas with higher than average concentrations of mortgage fraud.

Though the past year has presented a number of challenges in battling mortgage fraud, it has also brought about a very promising increase in the level of cooperation not only among lenders but between the real estate finance industry and law enforcement. We believe that through these efforts, the industry will significantly enhance its ability to not only identify and catch fraudsters, but to prevent lenders from becoming victims in the first place.