Threat of Loan Fraud Requires Lenders To Show Caution.(Brief Article)

While technology has helped make the origination and servicing of loans faster and more cost efficient, it has also made it a lot easier for sophisticated, yet unscrupulous borrowers to commit fraud.

Mortgage fraud has increased nationally approximately 10% to 15% from last year, said Arthur J. Prieston, the founder and principal of the San Rafael, Calif.-based The Prieston Law Firm, which specializes in mortgage fraud resolution and litigation, portfolio transfer disputes, servicing claims and disputes, and arbitration.

According to Mr. Prieston, this year's increase in foreclosure rates can also be attributed, in part, to the increase of mortgage fraud schemes.

"Within the universe of foreclosed-upon properties, you are always going to have a subset of mortgage fraud. The issue is, is it contributing to a larger percentage rate of foreclosures and the answer is yes," he said.

Mr. Prieston added that the "biggest problem is getting the attention of the executives. They need to understand that they need to support their quality assurance people. I think there needs to be better training and more accountability."

Mr. Prieston also took a stab at settlement agents.

"Settlement agents are a very intricate part of the fraud scam whether they participate willingly or not. Settlement agents are very much aware of when properties are about to be flipped and they could just simply notify the lender that this may be happening. The lender could take action or not. It would be up to the lenders prerogative," he said.