Efforts under way to fight mortgage fraud problem in S.C.

By Candace Jarrett
Morning News Reporter
Published: June 20, 2008

South Carolina’s efforts to stop mortgage fraud appear to be paying off.

South Carolina ranked fourth among states with the highest mortgage fraud scores, according to the June 2004 Mortgage Asset Research Institute Inc. mortgage fraud case report. The Palmetto State surpassed California and Florida, both of which topped the list for more than three years.

But in the March 2008 report, South Carolina didn’t even make the list.

S.C. Department of Consumer Affairs officials credit the difference to attacking the problem head-on with new and improving measures, such as the new mortgage fraud hotline instituted June 10.

“We have had a great response to it,” said Carri Grube Lybarker, a staff attorney with SCDCA. “We just want it to be a resource for people, because about 20 percent of foreclosures have some sort of mortgage fraud attached to them.”

The toll-free Stop Mortgage Fraud hotline is (800) 553-7723. It is staffed from 8:30 a.m. to 5 p.m. weekdays.

Lybarker said the hotline has received about 80 calls during the past week, including some from Darlington and Myrtle Beach.

“It really is an educational tool as well as a resource,” she said. “We have third-year University of South Carolina law clerks that work the hotline.”

People can call with questions about fraud or anything dealing with home mortgages and foreclosures, or if they just want someone to hear their concerns about purchasing or selling a home.

Mortgage fraud is committed if a person intentionally or knowingly makes a materially false or misleading written statement to obtain a mortgage loan.

Examples of criminal mortgage fraud include illegally inflating property appraisals by making it seem like more work was done to a home than actually was done to increase the property value. This also is called flipping, which is different from deals where houses are acquired legitimately, improvements are made and the houses are resold quickly. Those are called quick turns.

Concealing a second mortgage from a primary lender and concealing or stealing a borrower’s identity also are forms of mortgage fraud.

More and more people are foreclosing, and Toby Smith, a certified consumer credit and housing counselor with the Homeownership Resource Center, said foreclosures could fuel mortgage fraud. Her company meets two times each month at the Drs. Bruce & Lee Foundation Library in Florence, along with other satellite locations, to train and help homeowners with credit counseling, foreclosure and foreclosure prevention, among other items.

“The hotline is a good opportunity for consumers to stay with their money,” she said. “These scams are popping up all over the state and we’re all afraid that people who want to keep their homes will turn to these scammers, thinking they can help.”

In 2001, South Carolina was ranked No. 1 for mortgage fraud, according to the FBI’s Mortgage Fraud Report. According to the 2007 report, the state didn’t even rank in the top 10, coming in at No. 22.