Borrowers Keep Fudging The Figures

By Mara Der Hovanesian

So-called liar loans, in which mortgage seekers state their incomes without verifying them, were all the rage during the housing boom. In the bust, borrowers still try to push them through. Interthinx, a fraud detection firm, says it found suspiciously high incomes on many applications as recently as December. It flagged them as it reviewed 1 million applications from consumers reapplying for loans after being denied a mortgage or refinancing in 2006-07. Some 47,000 applicants, 5%, effectively claimed their incomes rose 25% or more somewhere between summer 2006 and the end of 2007. (In that time, the average U.S. worker’s wage rose about 3%.) The 5%, says CEO Jeff Moyer, represents about $12 billion in potentially fraudulent mortgages.