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With hundreds of millions of dollars in short sale losses over the past few years, the benefits have never been greater for lenders and servicers to implement short sale monitoring tools and improve their short sale fraud prevention strategies. rial information, such as the true value of the property, also constitutes fraud as it prevents the servicer from making an informed short sale decision, and Freddie Mac cites manipu- lating or influencing the broker price opinion (BPO) as one of the most common short sale fraud schemes. CoreLogic's fourth-quarter update to its Fannie Mae notes that falsifying mate- 2012 and heading into 2013 as industry experts anticipate short sale volume in these markets could potentially exceed foreclosure transactions. Additionally, investment buyers continue Association of Realtors (NAR). "I asked them what they're doing to combat short sale fraud, and they wouldn't have anything to do with it. It's a sad testimony to our industry," Klinge said. However, an NAR spokesperson says the Klinge also places blame on the National 2011 Short Sale Study examined 685,000 single-family residence (SFR) short sales from the first quarter of 2008 through the fourth quarter of 2011. CoreLogic, a provider of property, mortgage, and consumer data as well as fraud management technology, estimates unnecessary short sale losses due to suspicious transactions topped out at $300 million for the 2011 calendar year. That's down from the $375 million projected in May 2011 but still a hefty chunk of change to leave on the table. The company anticipates estimated losses to pose a disproportionate degree of risk with the suspicious rate for transactions involv- ing LLCs at around 20 percent compared with approximately 1.5 percent of all transac- tions in the CoreLogic study. CoreLogic also reports a rising trend in the percentage of suspicious short sales flipped for more than $50,000 profit as more than 60 percent of all suspicious transactions involve a resale for more than $50,000 above the initial short sale price. "People who commit mortgage fraud are will increase slightly in 2012 due to unrealized recoveries in short sale transactions that may be exacerbated by the new Freddie Mac and Fannie Mae regulations, shadow inventory—also known as pending supply overhang—and projected short sale volume increases in the marketplace. As a result, CoreLogic projects 2012 to experi- ence slightly higher losses than the approximately $300 million estimated for 2011. Shady Activity Clusters Lender Processing Services reports 160,541 short sales were completed in California during the 12-month period ending June 30, 2012. Florida's short sale tally over the same period was 99,620, and Arizona's was 51,872. As the volume of short sales continues to criminal opportunists who take advantage of whatever they can, [like] insider knowledge of lender operations and processes," said Ann Fulmer, an expert in mortgage fraud and investigations and VP of industry relations at Interthinx, a provider of risk mitigation tech- nology solutions. "Mortgage fraud is essentially committing robbery without a gun," she added. Lackadaisical Attitudes? Jim Klinge sees "shady dealings," as he calls grow, California, Florida, and Arizona remain the states with the highest SFR short sale volume and account for some 45 percent of all short sale transactions in the United States. According to recent CoreLogic data, these three states will maintain the same respective positions at the top of the rankings for SFR suspicious short sale transactions through 56 short sale frauds, at least once a day. Klinge, a broker with Klinge Realty in Carlsbad, California, holds the multiple listing service (MLS) among those at least partially culpable. "I think the problem is that the people who run the MLS refuse to lay out concrete rules on [how to properly conduct short sales]. They don't have specific boundaries, rules, or regula- tions; they just let it go." Why? "I think it's because they don't get paid enough to care. Administrators of the MLS are just keeping the store open and doing as little as possible. It's okay with them [if they operate] a mediocre business, something that people can use and abuse at their leisure." MLSlistings officials did not respond to requests for comment. organization's Short Sales and Foreclosure Resource Certification is currently the fastest- growing NAR certification and designation, which underscores the significance of the issue within the association. Nearly one in five Realtors now holds this certification, developed a few years ago. The certification is designed to help Realtors assist sellers in maneuvering the complexities of short sales and help buyers pursue short sale and foreclosure opportunities, the spokesperson explained. Klinge says banks are at least starting to pay more attention to the issue, albeit to a lim- ited extent. "I think they're doing what their attorneys tell them to do without spending too much money," he said. "They're just worried about the bottom line." Bryher, though, practically sees red over the role—or lack thereof—she feels many banks generally play in regulating short sales. "For the most part, banks don't care nor does law enforcement. [In fairness], because the bank is at least the primary victim, if they're not willing to do anything, it's harder for law enforcement to [act]," she said. Case in point: When Bryher contacted the bank involved in one of the short sale fraud cases in her book, "I could tell from the conversation that [the information I provided] would go straight into the trash," she recalled. Yet, Freddie Mac's Robert Hagberg insists the industry pays serious heed to the matter. Freddie Mac implemented controls to help deal with short sale fraud, including being first to mandate the use of a short sales affidavit designed to "hedge off a lot of [short sale fraud] activity," indicated Hagberg, the GSE's associ- ate director of mortgage fraud investigations. While the measures worked, Hagberg admitted, "When you put a control in place, some people will find a way to kind of jump the hurdle." The affidavit notwithstanding, banks have to follow up and at least conduct random audits "to keep people honest and prosecute those caught," Klinge observed. Fulmer, however, said today's environ- ment—for both large lenders and servicers—

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