Speculators may have accelerated housing downturn
NEW YORK – Feb. 6, 2008 – BasePoint Analytics reports that “occupancy fraud,” in which buyers say they plan to reside in a home but do not, accounts for approximately 20 percent of mortgage fraud cases.
Meanwhile, a Fitch Ratings analysis of 45 subprime mortgages that defaulted during the first year reveals that 67 percent of borrowers never lived in properties they purchased, despite declaring otherwise. Thus, homebuilders insist that 25 percent of homebuyers were actually investors during the housing boom, greatly exceeding their original estimate of 10 percent.
Experts believe these speculators lied about their occupancy status to take advantage of zero-down, no-documentation loans; but fraud specialists insist that lenders and home builders still could have scrutinized credit reports for evidence of numerous mortgages or used Internet search engines to get information about buyers as a means of lowering risk.
Clayton Fixed-Income Services President Kevin Kanouff says that Florida, Nevada, Arizona and other markets where home prices posted double-digit gains were most vulnerable to occupancy fraud.
Source: Wall Street Journal (02/06/08) P. B8; Simon, Ruth; Corkery, Michael
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