Mortgage fraud is a fast-growing form of white-collar crime that has received much press coverage in the United States of America. Mortgage fraud has an adverse effect on individual homeowners, communities, and many indirect victims of the crime. While past research has focused on the personal motivating factors behind the commission of white-collar crime, this particular article reviews several facets of the crime itself and explores the potential neighbourhood risk factors that help attract the crime. From a national perspective, mortgage fraud seems to occur more frequently in neighbourhoods that have low socioeconomic indicators. These associations become even more pronounced when the degree of fraud occurrences within the community is factored in as a variable. Upon disaggregating the data according to region, the fraud indicator variables also display differing trend levels, perhaps indicating that as mortgage fraud practices begin to mature within an area, its community dynamics tend to change as well. The article concludes with recommendations for policymakers, community organizations, and law enforcement officials as to how to address mortgage fraud once it appears within a community, and also addresses future avenues of research for what is largely an untapped area of financial crime research.
This is a preview of subscription content, log in to check access.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
In 2000, the number of potential mortgage fraud cases only accounted for 3,515 total cases (as measured by the housing industry’s count of Suspicious Activity Reports (SARs), but that figure has increased considerably to an estimated 28,000 potential cases by 2006.
Suspicious Activity Reports (SARs) are generated by banks and other money service businesses when the financial institution suspects that funds obtained from a client either: a) come from illegal activity, b) serves no known business or apparent lawful purpose, and/or c) is being used to facilitate criminal activity. Such reports are submitted to the Financial Crimes Enforcement Network, a subdivision of the U.S. Treasury.
In their analysis of savings and loan fraud, Spahr and Alison  also found that when accomplices were involved in that crime, they were usually outside the company.
While Ohio and Missouri data were largely inclusive of the entire state, Georgia’s data were limited to the metro-Atlanta area.
Census tracts tend to be homogeneous geographic areas, in which the residents share many of the same demographic and economic characteristics. Unlike U.S. municipalities, counties, and states, Census tracts are not based upon political boundaries but were designated because of their similarities and applicability toward the concept of community.
The U.S. Census Bureau officially classifies a property as vacant if no one is living in it at the time of the interview, unless its occupants are only temporarily absent. In addition, a vacant unit may be one which is entirely occupied by persons who have a usual residence elsewhere. New units not yet occupied are classified as vacant housing units if construction has reached a point where all exterior windows and doors are installed and final usable floors are in place.
Median house price value was not used in broad-based geographic analysis, due to the vast difference in local area house prices across regions of the country. This variable was included when analysis was confined to localized areas.
Immergluck  is one of several researchers who have made this connection.
HUD’s definition of “underserved” areas applies to Fannie Mae’s and Freddie Mac’s affordable housing goals, which were set by the U.S. Congress. Specifically, the U.S. Code of Federal Regulations 24, Section 81.2, states that an underserved geographical area consists of either “...[a] Census tract with median income at or below 120 percent of the median income of the metropolitan statistical area(MSA) and a minority population of 30 percent or greater; or a Census tract with median income at or below 90 percent of median income in the MSA”.
The research on underserved variables could not be performed for Ohio due to difficulties in matching up information on these areas with the proper Census tract variables.
Some of the variables from the earlier analysis, such as poverty rate and unemployment, were dropped from the model due to multicollinearity concerns.
Aaron, B. (2006). Draft fraud law ignores innocent buyer. The Toronto Star. Retrieved December 2, 2006 from http://www.thestar.com/article/96024, September 16.
Albrecht, W. S., Howe, K. R., & Romney, M. B. (1984). Deterring fraud: The internal auditor’s perspective. Altamonte Springs, FL: The Institute of Internal Auditors Research Foundation.
Apgar, W. C., & Duda, M. (2005). Collateral damage: The municipal impact of today’s mortgage foreclosure boom. Minneapolis, MN: Homeownership Preservation Foundation.
Association of Certified Professional Fraud Examiners. (2004). Report to the nation on occupational fraud and abuse. Retrieved December 5, 2007 from http://www.acfe.com/documents/2004RttN.pdf.
Atlanta Business Chronicle. (2007). Hill heads to federal prison in Atl.’s big mortgage fraud case. Retrieved December 2, 2007 from http://www.bizjournals.com/atlanta/stories/2007/09/17/daily36.html, September 21.
Bachtel, D. C. (2006). Understanding the 29-county East Georgia Cancer Network service area: A socio-economic–demographic perspective. Athens, GA: East Georgia Cancer Network, Inc.
Bajaj, V., & Creswell, J. (2006). Suit says neighborhood’s boom was built on mortgage fraud. New York Times, p. 1, October 6.
Baker, D. (2002). The run-up in home prices: A bubble. Challenge. Retrieved December 1, 2006 from http://www.findarticles.com/p/articles/mi_m1093/is_6_45/ai_95629328.
Barnett, C. (2004). The measurement of white-collar crime using uniform crime reporting (UCR) data. The Federal Bureau of Investigation: Crime justice information services. Retrieved November 3, 2006 from http://www.fbi.gov/ucr/whitecollarforweb.pdf.
Baum, K. (2006). Identity theft, 2004. Washington, DC: U.S. Bureau of Justice Statistics.
Besleme, K., Maser, E., & Silverstein, J. (1999). A community indicators case study: Addressing the quality of life in two communities. San Francisco, CA: Redefining Progress.
Bianco, K. M. (2008). Money laundering and mortgage fraud: The growth of a merging industry. CCH Incorporated. Retrieved September 23, 2008 from http://www.cch.com/press/news/CCHWhitePaper_Fraud.pdf.
Block, A. A., & Scarpitti, F. R. (1983). Defining illegal hazardous waste disposal: White-collar or organized crime. In G. P. Waldo (Ed.), Career criminals: Readings in organized, corporate, and professional crime. London: Sage.
Boatright, S., & Bachtel, D. C. (2007). The Georgia county guide. Athens, GA: University of Georgia.
Bond, P. (2006). People in business: Up close: Gail McKenzie. Atlanta Journal-Constitution, p. 2Q, March 26.
Braithwaite, J., & Geis, G. (1982). On theory and action for corporate crime control. Crime and Delinquency, 28(2), 292–314. doi:10.1177/001112878202800207.
Carswell, A. T., & Bachtel, D. C. (2007a). Assessing risk and protective factors of mortgage fraud. St. Louis, MO: Interthinx.
Carswell, A., & Bachtel, D. (2007b). Mortgage fraud: White-collar crime with long-standing community effects. Public Administration & Management, 12(4), 39–69.
Champion, D. J. (1998). Criminal justice in the United States (2nd ed.). Chicago, IL: Nelson-Hall.
Claessens, S., Glaessner, T., & Klingebiel, D. (2002). Electronic finance: Reshaping the financial landscape around the world. Journal of Financial Services Research, 22(1/2), 29–61. doi:10.1023/A:1016023528211.
Coalition Against Insurance Fraud (2001). Annual report. Washington, DC: Coalition Against Insurance Fraud.
Coleman, J. W. (2005). The criminal elite: Understanding white-collar crime. New York, NY: Worth.
Cooter, R., & Ulen, T. (2004). Law and economics (4th ed.). Boston, MA: Pearson Addison Wesley.
Cressey, D. R. (1953). Other people’s money: A study in the social psychology of embezzlement. Glencoe, IL: Free.
Creswell, J. (2007). Mortgage fraud is up, but not in their backyards. The New York Times. Retrieved May 21, 2007, from http://www.nytimes.com/2007/05/21/business/21fraud.html?ex=1185336000&en=2d25056b849b8783&ei=5070, May 21.
Croft, D. J., Sharick, M., & Larson, N. (2006). Explaining the many causes and potential progress of fraud. Secondary Marketing Executive. Available online at www.sme-online.comc.
Derus, M. (2006). The fight against mortgage fraud (p. 1). Milwaukee, WI: Milwaukee Journal Sentinel. May 21.
Dietz, R. D. (2003). The social consequences of homeownership. Columbus, OH: Homeownership Alliance Center.
Dionne, G., St.-Michel, P., & Vanasse, C. (1995). Moral hazard, optimal auditing and workers’ compensation. In R. Chaykowski, & T. Thomason (Eds.), Research in Canadian workers’ compensation (pp. 85–105). Kingston, Canada: IRC.
Ermann, M. D., & Lundman, R. J. (1996). Corporate and government deviance: Origins, patterns and reactions. In M. D. Ermann, & R. J. Lundman (Eds.), Corporate and governmental deviance, 5th ed. (pp. 3–44). New York, NY: Oxford University Press.
Financial Crimes Enforcement Network.(2006). Mortgage loan fraud: An industry assessment based upon suspicious activity report analysis. Retrieved December 17, 2006 from http://www.fincen.gov/MortgageLoanFraud.pdf, November.
Fletcher, J. (2005). House poor: Pumped-up prices, rising rates, and mortgages on steroids. New York: HarperCollins.
Gillispie, M. (2006). City’s housing glut allows mortgage fraud to thrive. Cleveland Plain Dealer, p. A1, July 29.
Grauer, B. (2006). Law protects against mortgage fraud. Chicago Sun-Times, p. 32, October 5.
Griffin, S. P. (2002). Actors or activities? On the social construction of “white-collar crime” in the United States. Crime, Law, and Social Change, 37, 245–276. doi:10.1023/A:1015029710490.
Harkness, J., & Newman, S. J. (2002). Homeownership for the poor in distressed neighborhoods: Does this make sense? Housing Policy Debate, 13(3), 597–630.
Harmon, J. (2006). More anti-fraud laws foreseen in states. Origination News, 15(12), 64.
Hawkins, J. D., & Catalano Jr., R. F. (1992). Communities that care: Action for drug abuse prevention (1st ed.). San Francisco: Jossey-Bass.
Hillyard, P., & Tombs, S. (2007). From ‘crime’ to social harm? Crime, Law, and Social Change, 48(1-2), 9–25. doi:10.1007/s10611-007-9079-z.
Hollinger, R. C., & Clark, J. P. (1983). Theft by employees. Lexington, MA: Lexington Books.
Immergluck, D. (2006). Credit to the community. Armonk, NY: Sharpe.
Immergluck, D., & Smith, G. (2006). The impact of single-family mortgage foreclosures on neighborhood crime. Housing Studies, 21(6), 851–866. doi:10.1080/02673030600917743.
Immergluck, D., & Smith, G. (2005). There goes the neighborhood: The effect of single-family mortgage foreclosures on property values. Chicago, IL: Woodstock Institute.
Iwata, E. (2005). Fraud booms with mortgage market. USA Today. Retrieved December 3, 2007 at http://www.usatoday.com/money/perfi/housing/2005-10-04-fraud-usat_x.htm, October 4.
Jackson, D. (2005). The new street hustle. Chicago Tribune, p. A1, November 5.
Johnson, C., & Tse, T. M. (2007). FBI to focus on area mortgage loan fraud. Washington Post, pp. D1,D2, December 6.
Johnson, D. T., & Leo, R. A. (1993). The Yale White-Collar Crime Project: A review and critique. Law & Social Inquiry, 18(1), 63–99. doi:10.1111/j.1747-4469.1993.tb00647.x.
Joint Center for Housing Studies (2003). The state of the nation’s housing. Cambridge, MA: Harvard University.
Kelly, T. (2006). Keeping fraud cases from falling through the cracks. Los Angeles Times, p. 17, July 30.
LeReah, D. (2005). Are you missing the real estate boom? New York: Doubleday.
Malanga, S. (2008). Predatory lending, or mortgage fraud? RealClearMarkets.com. Retrieved September 19, 2008 from http://www.realclearmarkets.com/articles/2008/04/predatory_lending_or_mortgage.html, April 9.
McLellan, W. (2006). Booming market fuels mortgage fraud. The Montreal Gazette, p. B4, May 1.
Mintz, J. (2006). Mortgage fraud rises in cooling housing market. Ventura County Star. Retrieved October 15, 2006 from http://www.venturacountystar.com/vcs/business/article/0,1375,VCS_128_5049085,00.html, October 7.
Mortgage Asset Research Institute. (2006). Eighth periodic report to Mortgage Bankers Association. Retrieved November 12, 2006 from http://www.mortgagebankers.org/files/News/InternalResource/42175_Final-8thAnnualCaseReporttoMBA.pdf, April.
Mortgage Bankers Association of America (2007). Mortgage fraud: Strengthening federal and state mortgage fraud prevention efforts. Washington, DC: Author.
Murphy, K. (1993). Honesty in the workplace. Pacific Grove, CA: Thomson Brooks/Cole.
Nath, R., Schrick, P., & Parzinger, M. (2001). Bankers’ perspectives on Internet banking. E-Service Journal, 1(1), 21–36. doi:10.2979/ESJ.2001.1.1.21.
Nelson, R. H. (2005). Private neighborhoods and the transformation of local government. Washington, DC: Urban Institute.
Patterson, S. (2006). Ripped off: The flip side of Florida’s real estate boom. Jacksonville, FL: Florida Times-Union, p. A1, January 22.
Roberts, R. R., & Dollar, R. (2007). Protect yourself from real estate and mortgage fraud: Preserving the American dream of homeownership. New York, NY: Kaplan.
Rohe, W., Van Zandt, S., & McCarthy, G. (2000). The social benefits and costs of homeownership: A critical assessment of the research. Washington, DC: Research Institute for Housing America.
Rosoff, S. M., Pontell, H. N., & Tillman, R. (2004). Profit without honor: White-collar crime and the looting of America. Upper Saddle River, NJ: Pearson/Prentice Hall.
Sandler, A. L., Raman, A. S., & Mitchell, A. K. (2006). Mortgage fraud wave requires strict regimen to resist. ABA Banking Journal, 52–60, June.
Scanlon, E. (1998). Low-income homeownership as a community development strategy. In M. Sherraden, & W. Nincan (Eds.), Community economic development and social work. New York, NY: Haworth.
Shapiro, S. P. (1990). Collaring the crime, not the criminal: Reconsidering the concept of white-collar crime. In N. Shover, & J. P. Wright (Eds.), Crimes of privilege: Readings in white-collar crime. New York, NY: Oxford University Press.
Shapiro, S. P. (1984). Wayward capitalists: Targets of the Securities and Exchange Commission. New Haven, CT: Yale University Press.
Sharick, M., Butts, J., Donahue, M., Larson, N., & Croft, D. J. (2007, April). Ninth periodic mortgage fraud case report to Mortgage Bankers Association. Reston, VA: Mortgage Asset Research Institute.
Shiller, R. (2005). Irrational exuberance (2nd ed.). Princeton, NJ: Princeton University Press.
Shlay, A. B. (2006). Low-income homeownership: American dream or delusion? Urban Studies (Edinburgh, Scotland), 43(3), 511–531. doi:10.1080/00420980500452433.
Silverstein, A. (2006). Fix mortgage fraud now: Our politicians need to get together and fight this mushrooming problem. Toronto Sun, October 10.
Smith, G. M. (2006). The mystery of Wolf Creek. Atlanta Magazine, p. 102–105, 120–125, March.
Smith, S. (2002). Predatory lending, mortgage fraud and client pressures. The Appraisal Journal, 70(2), 200–213.
Spahr, L. L., & Alison, L. J. (2004). U.S. savings and loan fraud: Implications for general and criminal culture theories of crime. Crime, Law, and Social Change, 41(1), 95–106. doi:10.1023/B:CRIS.0000015323.96447.5f.
Sparrow, M. (1996). License to steal. Boulder, CO: Westview.
Streitfeld, D. (2006). More home buyers stretch truth, budgets to get loans. Los Angeles Times. Retrieved October 1, 2006 from http://articles.latimes.com/2006/sep/29/business/fi-loanfraud29, September 29.
Tolson, S., & Anderson, N. (2007). New watchdogs for fraud? Mortgage Banking, 68(2), 70–73.
Toneguzzi, M. (2006). Mortgage fraud growing: $1.5 billion a year and often accomplished by identity theft. Calgary Herald, p. B8, March 27.
United States Bureau of the Census (2007). Statistical Abstract of the United States (126th ed.). Washington, DC: Government Printing Office.
Ventolo, W., & Williams, M. (2004). Fundamentals of real estate appraisal (9th ed.). Chicago, IL: Dearborn Real Estate Education.
Vito, G. F., & Holmes, R. M. (1994). Criminology: Theory, research, and policy. Belmont, CA: Wadsworth.
Washington, C. (2006). Fraud clouds real estate lending: As housing market thrives, so does criminal activity, authorities say. The Business Press, p. 14, April 24.
Weissman, S. (2006). Mortgage Fraud. Paper presented at Mortgage Fraud Symposium, Savannah, GA, June 22.
Wells, J. T. (2004). Corporate fraud handbook: Prevention and detection. Hoboken, NJ: J. Wiley.
The authors would like to thank two anonymous referees for their part in improving the quality of this manuscript. In addition, we are grateful to Ann Fulmer and her colleagues at Interthinx for providing data used in this project. Thanks also to Nikki Williams for providing excellent editorial assistance. Without her expert guidance, we could not have completed this task.
About this article
Cite this article
Carswell, A.T., Bachtel, D.C. Mortgage fraud: A risk factor analysis of affected communities. Crime Law Soc Change 52, 347–364 (2009). https://doi.org/10.1007/s10611-008-9186-5
- House Price
- Census Tract
- Housing Market
- Vacancy Rate
- Underserved Area