Tagged: Mortgage Fraud
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What is Mortgage Fraud
Posted by Randy on August 9, 2024 at 3:24 amWhat constitutes mortgage fraud? How can innocent borrowers and loan officers get in trouble committing mortgage fraud. What are the different forms of mortgage fraud.
Rocky replied 2 months, 3 weeks ago 2 Members · 1 Reply -
1 Reply
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Mortgage fraud is a serious crime. It refers to giving false, misleading, or incomplete information to a mortgage lender to secure a loan. Many participants are involved in mortgage fraud, which can be committed by borrowers, lenders, real estate agents, and even appraisers. This type of scam aims to obtain credit that one would otherwise not qualify for or obtain favorable terms illegally from property transactions.
Categories of Mortgage Fraud
There are two broad classifications under which most cases fall. Fraud for profit and Fraud for housing. Below, we take an in-depth look into each category alongside its accompanying schemes:
Fraud for Profit
The Fraud for profit type involves insiders within the industry, such as attorneys, mortgage brokers, appraisers, or any other professional who manipulates processes involved with home loans to steal money from lenders or homeowners. It tends to be more complex than other types because it requires collaboration between various individuals.
Common Schemes Associated With This Type Include:
Appraisal Fraud:
It entails inflating or deflating property value to secure higher amounts on loans taken against it by people who may want quick cash through this method. Some may choose to inflate and then later claim insurance. Bribes could also work. Someone pays off someone like an appraiser, thus giving wrong reports about the worth of some building. All these acts can be classified as appraisal frauds.
Equity Skimming:
Here, an investor (or con artist) convinces the owner to transfer the ownership deed, promising to clear all debts attached, including mortgages. But it only does something else apart from collecting rent once such property is foreclosed. The property goes into foreclosure due to the nonpayment of installments towards financing. It is said to be the purchase price plus interest. They are charged monthly until full discharge occurs, either voluntarily or by the seller, upon finding out that the buyer never cleared arrears, even after receiving enough funds over a period agreed upon or through court action once arrears exceed certain limits stipulated within the agreement, among other things.
Occupancy Fraud:
The borrower lies about their plans to live in a house as a primary residence to get better loan terms. For example, they might want to lower their payments or interest rates. However, such borrowers desire to use the property for investment and rent it out.
Employment Fraud: Employment Fraud involves providing incorrect information about employment status when applying for mortgage loans. It can range from indicating nonexistent employers to exaggerating job titles and income levels.
Asset Fraud occurs when borrowers misrepresent their net worth by creating nonexistent assets. They also fail to declare other debts or inflate bank account balances so lenders consider them creditworthy.
Identity Theft: Identity theft occurs when someone else’s identity is used without authorization to apply for a mortgage loan. The criminal may already have stolen personal data needed before approaching money lending institutions for such financial assistance. The actual individual whose ID was taken remains ignorant until they either receive bills related to these loans or find fraudulent credits reflected on their reports.
More Forms of Mortgage Fraud
Foreclosure Rescue Scams: Fraudsters target homeowners facing foreclosure. They offer to help them “save” their homes through negotiations with lenders on their behalf. Owners are then deprived of ownership rights while remaining indebted elsewhere. This is because scam artists take all the money the client pays towards this program, thus leaving them poor but with no property.
Loan Modification Scams: People pretending to work towards modification programs charge upfront fees. Eventually, it turns out fruitless since only collection charges are done. This, in turn, worsens financial stability among individuals seeking support during these difficult times.
Reverse Mortgage Scams: Older people get tricked into borrowing against homes. Only criminals involved here take away everything borrowed plus any other valuables they come across during the execution process. This is even if it means forcing elderly victims to sign over properties legally belonging elsewhere among heirs. Heirs may not even know what happened until later when trying to access rightful inheritance rights concerning estate matters, thus making it another common type of mortgage fraud.
Consequences of Mortgage Fraud
Legal Penalties: Mortgage fraud is a federal offense punishable by law. Hence, guilty individuals can be imprisoned for many years and pay hefty fines that may exceed what was initially stolen from these fraudulent activities.
Financial Loss: Mortgage scams cause lenders and homeowners huge financial losses. These losses can lead to defaults in repayments or the complete inability to settle debts as required within specified periods, which can lead to bankruptcy processes being initiated against affected parties who are unable to meet their obligations under this agreement.
Credit Damage: False acts usually result in defaults on loans and foreclosures. Among other negative marks on credit reports lead to poor ratings, hence rendering it impossible for an individual to secure any future borrowing requiring a good history of repayment ability. Thereby ruining one’s chances of building a strong economic foundation through investment opportunities available around them. This happens especially within the real estate sector, where most gains are made over time. Exceeding three decades minimum before major shifts occur either upwards or downwards, but fortunately not sideways like now when prices have stagnated due to oversupply relative demand factors still prevailing here at home, unlike abroad.
In conclusion, mortgage fraud is a very intricate crime with many different types. It can be perpetrated by people looking to buy homes or professionals trying to make money. Regardless of who commits it, though, there will always be severe consequences for all parties involved in such scams and innocent victims who may find themselves caught up in them if they fail to recognize warning signs early enough before becoming too deeply entrenched within fraudulent schemes. Therefore, knowing various forms of this illegal activity would greatly benefit buyers, lenders, agents & brokers, helping them avoid unscrupulous dealings while transacting real estate.
https://gustancho.com/owner-occupancy-fraud/
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Understanding Owner Occupancy Fraud Mortgage Guidelines
Owner Occupancy fraud is a serious crime and falls under mortgage fraud. A borrower cannot state it is a owner occupied property if it isn't