Mortgage Fraud Foreclosure

When purchasing a property, there are numerous variables to consider. In fact, there are so many that it might be challenging to keep track of them all. Having all of your ducks in a row, though, can do more than just relieve stress; it can also protect you against financial and legal dangers, such as mortgage fraud.

Why Would You Deliberately Commit Mortgage Fraud?

A borrower or industry professional may be motivated to commit mortgage fraud for a variety of reasons. Borrowers who conduct property fraud are usually motivated by a desire to keep their present home or purchase a new one. These borrowers believe they are unlikely to be approved for a loan if they provide accurate information; therefore, they lie or omit essential information like job and income, debt and credit, or property worth to boost their chances of approval and possibly acquire it better loan conditions.

Professionals in the industry commit fraud for profit by misrepresenting their clients’ financial information in order to maximize their transaction revenues. It’s crucial to remember that every professional participating in the loan transaction, from the real estate agent to the appraiser, the mortgage banker, and beyond, might commit fraud for profit.

What Kinds Of Mortgage Fraud Are There?

There are numerous forms of mortgage fraud schemes to be cautious of, ranging from property flipping to foreclosure fraud. The following examples are based on a list of the most common types of mortgage fraud provided by the FBI. Although these are the most well-known schemes, keep in mind that this is not a comprehensive list.

1. Property Investing

   Property acquisition, renovation, and resale are not necessarily criminal. If that were the case, the rise of property flipping shows would have been much more contentious. However, there are times when house flipping becomes unethical. This sort of mortgage fraud happens when a property is purchased below market value and then sold for a profit, usually with the assistance of a dishonest appraiser who inflates the property’s worth.

2. Rental of Assets

   When loan applicants borrow or rent the assets of others in order to look more suitable for mortgage finance, this is known as asset rental fraud. The money is usually paid back to whomever it was borrowed from when the mortgage closes.

3. Scams Involving Foreclosures

   Unfortunately, scammers may try to take advantage of homeowners who are about to lose their homes to foreclosure. In this sort of mortgage scam, homeowners who are about to fail on their loans or whose homes are in foreclosure are made to believe that by putting the property in the name of a third-party investor, they may preserve their homes from foreclosure. The offenders profit by selling the property using a phony appraisal and stealing the proceeds from the seller.

   To avoid being a victim of this scam, do not give anyone any money or personal information until you have contacted your lender or servicer. Remember that we will provide aid at no cost to you; therefore, you should never trust a third party who demands payment for foreclosure relief!

4. Use of a False Identity

   Scammers frequently perpetrate mortgage fraud by using fictitious or stolen identities. This occurs when a scammer obtains finance by exploiting the financial information of an unwitting victim, such as Social Security numbers, stolen pay stubs, and forged job verification forms, to secure a fraudulent mortgage on a house they do not own or occupy.

   Because physical papers, such as bills and cheques, typically contain sensitive information, they can put you at risk of identity theft. You may protect yourself by switching to paperless bills and electronic payments wherever possible.

5. Exaggerated appraisals

   Scammers frequently use false appraisals to commit mortgage fraud. Appraisal fraud can be perpetrated by the appraiser alone or in collaboration with other professionals such as the builder and mortgage banker.

   A corrupt appraiser may undervalue a property to ensure that an investor can buy it. Still, more frequently than not, we see appraisers inflating the value of a property to boost the purchase price and, in turn, maximize their compensation.

What Are The Consequences Of Mortgage Fraud?

Mortgage fraud is a severe offense that can result in serious legal ramifications. There is legislation in place to keep borrowers and mortgage experts accountable at the local, state, and federal levels. A mortgage fraud conviction under existing federal and state legislation can result in up to 30 years in federal prison and up to $1 million in fines, depending on the scope of the fraudulent activity.

How Can I Stay Away From Mortgage Fraud?

The most effective approach to avoid mortgage fraud is to buy a home responsibly. Use these best practices to see the warning signals and avoid being a victim of these con artists:

• An attorney should thoroughly review all legal papers: This ensures that you comprehend everything you’re signing. Attorneys are also experienced in these types of transactions and will spot any potential red flags you should be aware of.
• Check all participants’ references and recommendations, including real estate brokers and loan officers: You may get reviews and recommendations for your mortgage specialists by searching online. When in doubt, ask reliable friends or family for recommendations.
• Examine the property’s title history and make sure it’s correct: A title search will reveal who owns the property you want to buy, as well as any outstanding obligations, such as unpaid property taxes, homeowner’s association fees, and home repair bills.
• Examine the final loan documentation to confirm that all information is correct and complete: This step may appear simple, but it is critical. The mortgage process involves numerous steps and paperwork, and it can be tough to keep track of them all. Make sure you verify the final loan documentation to ensure the information is correct.

Final Thoughts

Mortgage fraud is serious business — it’s dangerous, illegal, and terrifying if you don’t know how to avoid it. As a homeowner, you may be a target for scammers or be in danger of becoming a victim of identity theft. To guarantee your own safety and success, we always recommend consulting a real estate professional to check any legal papers prior to closing on a property.

If you suspect you’ve been a victim of mortgage fraud, notify your local law enforcement and the other agencies as soon as possible.