Mortgage Fraud on the Rise

Fraud artists are refining their schemes to take advantage of market distress, the report said. For example, some real-estate brokers, in a scheme known as house "flopping," target homes that are underwater—meaning their owners owe more than the market value of the house—and obtain artificially low valuations of homes.


Then, using these valuations, the brokers convince the lender to agree to a short-sale, in which it sells a home for less than the mortgage. The buyer, in turn, quickly sells the home at market value, profiting, along with the broker, from the difference in sale prices.

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