The toll fraud has taken on the mortgage business has been described as epidemic.

Lenders suffer tremendous financial losses when loans go sour because someone in the process has committed fraud, losses that some experts have estimated to be in the billions of dollars each year.

No wonder, then, that a fraud awareness seminar sponsored the Mortgage Bankers Association last December was sold out and another one schedule for next month is filling up rapidly.

But as it turns out, lenders aren't the only ones in the mortgage process who are reeling from a greater incidence of fraud. So are the three major credit reporting repositories.

In fact, last year's record loan volume spurred a similar increase in requests for credit reports from Experian, Trans Union and Equifax. But the jump in activity has come at a price.

"Fraud is one area we're really struggling with," according to Terry McComas of the Dallas-based Experian, who says credit reporting activity at his company for the last five quarters is running 25 percent-30 percent higher than normal.

McComas said at the National Home Equity Mortgage Conference in Boca Raton last month that his business is "being targeted" by crooks who see it as "just another avenue" to hoodwink mortgage lenders.

Like lenders, Experian sees fraud from within its own organization as well as from outside.

When the credit agency discovers that an employee has tampered with data in a file, according to McComas, it calls in the police, who march the worker out of the office in handcuffs in front of everyone else so all can see the consequences of such an illegal act.

The firm also is seeing a higher incidence of cleverness on the part of con artists. In one of the more recent schemes Experian has discovered, crooks are calling in "bad trade lines" on fictitious customers. That is, they are reporting that a non-existent client as not paid his bills on time as promised.

Next, the crooks report that the imaginary client has cleared up his problems and brought his account up to the "as agreed" status. And shortly thereafter, they apply for a mortgage or other line of credit under the fictional client's name.

"We've seen an extensive amount of (such) activity over the last 12 months," said McComas.

This kind of skullduggery is usually difficult to undercover. But thieves tend to trip themselves up by becoming impatient and reporting that the mythical client has cleaned up his act too quickly, the Experian executive reported.

"When a new trade lines is reported as a bad one month and as an 'as agreed' the next month," he said, "that's usually a red flag that something's amiss."

Published: April 3, 2002

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.