Who is spending your equity?

It is one thing to be underwater through bad choices such as HELOCing the house for a cruise, plasma TV, and landscaping services. It is another to be underwater because someone else - unbeknown to you - HELOCed your house for their cruise, plasma TV, and landscaping services. Just like those identity theft ads on TV for a credit card - people can steal your identity and take all your equity with them. When home values were annually increasing in double digits the problem was big, but not as significant as when people will lose their homes due to these crimes.

Equity theft, like many white collar crimes, requires more man hours, more investment, and are difficult to prove in court due to the complexity of the issues. In the Washington Post there was an article titled Thieves Stole Identities to Tap Equity Lines outlines some of the recently busted crimes. Lets take a look -

The cases highlight what the FBI calls an "emerging scheme" afflicting the struggling real estate and mortgage market. In such crimes, thieves target people with good credit and large, untapped home-equity lines of credit, digging through public records -- such as property deeds and mortgages -- as well as publicly available Internet databases to obtain credit applications, credit reports and victim signatures.

"Home-equity lines of credit are an expanding front in the battle against mortgage fraud," said New Jersey U.S. Attorney Christopher J. Christie. "Homeowners should carefully review their statements to make sure their hard-earned equity is not disappearing from under their noses."

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In a report released last summer, the Credit Union Information Security Professionals Association said a number of credit unions have beefed up security in response to an increase in home-equity fraud, but those precautions have come with their own costs: "Customer service call times have increased one minute on average due to increased security verifications, and some legitimate members are failing increased security questions," the report noted.

Anne Wallace, president of the Identity Theft Assistance Center, a nonprofit industry group, said properly training bank employees to detect fraud is critical.

"It's a challenging problem for companies across the board," Wallace said, "how to train your employees to balance customer service and protecting critical assets."

Wallace said consumers can help combat this growing form of fraud by keeping a close eye on bank statements and by taking full advantage of a federal law that guarantees consumers a free copy of their credit report from each of the three major credit reporting bureaus. Consumers can request credit reports three times a year for free at each credit bureau.

Restricting access and making more barriers may deter some criminals, but they can also aggravate customers. This will be especially true for people that do nor realize the procedures were set up in place to protect them. Like most victims, they are unaware of their surroundings - even financial ones. The small amount of work to review your credit reports periodically is a lot better than finding out your the victim well after the fact.