Mortgage Fraud Explained

26.08.2010 | Author: jverner | Posted in Mortgage-Refinance

Mortgage fraud is a word describing a broad variety of criminal activities with the intention to misrepresent or omit information on a mortgage loan application to get a loan or a large loan amount. In the courts, it is prosecuted as wire fraud, mail fraud, bank fraud and money laundering with up to thirty years imprisonment.

Due to the increasing fraud increase the past few years, some states have also started to enact their own penalties for this crime. Here are some examples of a mortgage fraud:

  • 1. Undisclosed kickbacks such as striking a deal with a seller to give you cash or a check across the table to pay for a new roof and the lender is not aware of it because it is not disclosed on the purchase contract; addendum or the estimate closing statement, then it is considered as a mortgage fraud.
  • 2. If a borrower without a down payment borrows a down payment from the seller in exchange of giving a seller a silent second mortgage, which is not recorded and hidden from the mortgage lender.
  • 3. Falsifying employment income by inflating their income above and beyond the W-2. In other words, intentionally making false entries on income received every month.
  • 4. Down payment gifts you have to repay. Both parties, the recipient and giver commit loan fraud if the gift is to be repaid since gifts cannot be repaid.
  • 5. If you have two purchases and send the false contract with the higher price sales to the mortgage lender with the hope of acquiring a higher appraisal.
  • 6. Some dishonest borrowers without an earnest money deposit could state in the contract that the deposit was paid outside of escrow.
  • 7. Lying on your real estate loan application, even tiny items could constitute a fraud. Nevertheless, many borrowers a hedge a little here and there often because they do not know better or even worse, since the real estate professional suggested the idea.

    • If a real estate professional will approach you and ask you to be a part of a mortgage fraud scheme, and if you suspect any mortgage fraud, make sure to report it to the FBI immediately. Keep in mind that deal that sounds too good to be true is most likely a scam.

    Furthermore, be aware that a mortgage fraud is a prosecutable crime and is against the law. If you have the suspicion that you are being asked to be a part of it or encouraged to break the law, talk to a reputable real estate attorney or the licensing authority in your state before you move forward with your plans.

    Keep in mind that mortgage fraud is a growing crime rate that is threatening to hurt homeowners, businesses and the national economy as well. Protect your home and its equity and avoid falling victim to fraudulent activities by recognizing and understanding the signs of mortgage fraud. Make it a point to know how to report fraud to your state or the federal authorities so they can prevent scam artists from preying on innocent people.

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