Mortgage Fraud Rates Are Going Up And The Reason Is Clear

U.S. house prices climbed 4.5% from the fourth quarter of 2023 to the fourth quarter of 2024, according to a report by the Federal Housing Finance Agency. At the same time, mortgage application volume declined as the costs informing average homeowner spending increased, squeezing buyers' budgets.

Fraud is creeping higher too, and the reasons aren't hard to see. Economic pressures like steep interest rates are driving more borrowers and insiders to bend the rules to lock in financing. The Federal Reserve Bank of New York's Survey of Consumer Expectations showed mortgage rejection rates climbed to 22.5% in February 2024, meaning at least one in five borrowers saw their loan denied.

That squeeze left more applicants stalled before they ever reached closing. CoreLogic found an 8.3% increase in fraudulent mortgage applications year-over-year in 2024, which equated to roughly one in every 123 applications getting flagged for suspicious activity. The pressure's intensifying on both applicants and originators to find alternate ways to buy a house if they're broke.

Rising home costs have pushed some borrowers into desperate territory. The Federal Housing Finance Agency's National Mortgage Database shows 50.8 million outstanding mortgages, 14.3% of which carry interest rates of 6% or higher. Their unpaid balances hit $11.7 trillion by the end of the first quarter of 2024. When payments stretched too far, a number of borrowers resorted to falsifying information about their income or jobs in hopes of refinancing or evading foreclosure. The Mortgage Bankers Association reported 3.97% of one-to-four-unit residential loans were delinquent at the end of Q2 2024, up 60 basis points from the year before.

The pressure was even heavier in purchase markets. Inventory stayed thin, yet demand kept climbing. The National Association of Realtors reported that the typical monthly mortgage payment for a single-family home with a 20% down payment hit $2,124 in Q4 2024. That consumed up to 24.8% of family income — a slightly smaller percentage than the year before, but still a large enough expense to beg the question: Will future generations ever be able to afford a home through legitimate means?

The pressure translated directly into fraud. The Mortgage Bankers Association, citing CoreLogic data, said transaction fraud risk jumped 4.9% as buyers misrepresented down payments and seller concessions while identity fraud climbed 5.5%.

The FBI received around 3,600 reports of potential mortgage fraud in 2024, but only 38 people were actually convicted — meaning most scammers get away with it. Take Kimberly Johnson for example: The Department of Justice reports she operated a massive scheme involving over 450 fraudulent loans. She fabricated material documents to falsely qualify buyers who couldn't afford the payments, creating $161 million in fraudulent loans. Many of those loans are already in default, and Johnson pleaded guilty in January 2025.

Fraudulent behavior can be hard to see in the moment, but there are some common warning signs. For example, scammers often want upfront fees before they lift a finger. They might also tell you to send mortgage payments somewhere new, instead of to your current loan servicer. You might also get random calls from companies claiming they can slash your mortgage rate, stop foreclosure, or help you stay as a renter and buy your home back later.

Real financial trouble calls for real help. Housing counselors approved by the Department of Housing and Urban Development work for free and never charge upfront fees. These certified counselors help you get your finances straight and figure out mortgage options. The FBI handles most criminal cases and takes reports through their online tip system. HUD's Office of Inspector General also runs a fraud hotline. The penalties are often fines, plus potential jail time for realtors with shady practices.