Purchasing a home in California can be a dream come true. With the city’s numerous amenities, idyllic climate and gorgeous natural beauty, Southern California has much to offer to those who wish to purchase a beautiful home within a luxury community. Nonetheless, as with any purchase that requires making large monetary investments, it is important to utilize caution to ensure your financial situation is properly protected. Unfortunately, this is even more important in the state of California, as California has been consistently named as one of the top 10 mortgage fraud states every year.
A History of Fraud
According to figures published by the Federal Bureau of Investigation, California was listed third in the nation in both 2009 and 2010 in terms of mortgage fraud incidents. The state fell slightly in 2011 and 2012, at which time it was ranked in the seventh place position. Things seemed to be improving further in 2013, at which time California fell to tenth position. It rebounded in 2014, however, when it jumped up to second place.
Examining the Issue
There are a number of different factors that may be contributing to the fact that California has such a high incidence of fraud. For example, it is a very large state with a wide variety of investment properties and communities. California also has large and diverse housing stock while also allowing many different parties to participate in the closing process. Although licensed escrow companies are primarily responsible for handing escrow and closing, property title companies, attorneys and real estate brokers are also frequently involved in the process. In some cases, real estate brokers handling the entire closing process on behalf of their clients. In Southern California, it is common for escrow companies and lenders to deal with escrow and closing services, while title companies traditionally handle these activities in Northern California.
Recovering from Mortgage Fraud
Unfortunately, recovering from losses resulting from mortgage fraud can be quite difficult. Escrow officers, for example, are only required to have a stated $25,000 net worth and to carry a $125,000 fidelity bond along with a $25,000 surety bond. Furthermore, attorneys in California are not required to carry malpractice insurance at all. With the average mortgage being more than $300,000 in the state of California and luxury homebuyers borrowing much more, this does not go far toward recovering losses. Even more disheartening is the fact that California lenders do not have a legal duty to report fraud if they have knowledge that it is occurring.
Clearly, more risk management rules and vendor management programs would benefit those who wish to purchase real estate in California. In the meantime, you have the responsibility as the buyer to protect yourself and your investment. This means being continually aware of what is taking place with your purchase and ensuring you are carefully reading all documentation related to your home purchase. It is also beneficial to put together a team who you can trust to help ensure you are making a financially sound purchase. Our team of professional real estate agents will be happy to help guide you through the process of purchasing a luxury home in Southern California. We specialize in the area’s most exclusive communities and homes.
While you’re already in the process of looking for a home, look into the properties below priced from $4 Million to $8 Million and contact our agents for more information.
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