How Can You identify Mortgage Fraud?
Each mortgage scam contains some kind of misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, buy or insure a loan. Mortgage scam is easily practiced particularly where mortgage industry professionals are involved. The true level of mortgage scam is largely unknown because a meaningful portion of the mortgage industry is void of any mandatory fraud reporting and in addition, mortgage fraud in the secondary market is often under reported. Based on various industry reports and examination, mortgage scam is pervasive and growing. Mortgage scam can be basically analyzed as:
* Fraud for Profit – Sometimes referred as “Industry Insider Fraud” and the motive is to falsely inflate the value of the character, issue loans based on fictitious similarities or revolve equity. Based on existing approximate reports, eighty percent of all reported mortgage scam losses include collaboration or collusion by industry insiders
* Fraud for Housing – An illegal action perpetrated solely by the borrower. This kind of mortgage scam is done by a borrower who makes misrepresentations regarding his income or employment history to qualify for a large loan. The motive behind this scam is to acquire and continue ownership of a house under false pretenses
Fraud for Housing can not be compared to the scam done by mortgage scam industry professionals which affect the borrowers. Predatory lending usually is targeted towards senior citizens, lower income and challenged credit borrowers. Mortgage lending representatives force borrowers to pay exhaustive loan settlement fees, sub-chief or higher interest rates, and in some situations, unreasonable service fees. The usual consequence is the borrower defaulting on his mortgage payment and undergoing foreclosure or forced refinancing. Our focus is to recognize the mortgage scam that could happen to us, the borrower.
MORTGAGE SCAM SCHEMES
False or Stolen Identity – A fake identity may be used on the loan application. The applicant may be involved in an identity theft scheme and use someones personal information without the true person’s knowledge.
Inflated Appraisals – An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender. This report inaccurately states an inflated character value.
Silent Second Mortgage – Buyer of a character borrows the down payment from the seller by the issuance of a non-disclosed second mortgage. The dominant lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its position from the dominant lender.
Nominee Loans – The identity of the borrower is hid by the use of a nominee who allows the borrower to use the nominee’s name and credit history to apply for a loan.
Equity Skimming – An investor may use a nominee, false income documents, and false credit reports, to acquire a loan in the nominee’s name. later to closing, the nominee signs the character over to the investor in a quit claim deed which relinquishes all rights to the character and provides no guaranty to title. The investor does not make any mortgage payments and rents the character until foreclosure takes place a few months later.
character Flipping – A character is bought, falsely advertised at a higher value, and then quickly sold. What makes this character illegal is that the appraisal information is fraudulent. The schemes typically include one or more of the following; fraudulent appraisals, doctored loan documentation and inflated buyers income… Kickbacks to buyers, investors, character and loan brokers, appraisers, title company employees are shared in this scheme. A home may be appraised for $100,000 but is truly worth $30,000.
Air Loans – This is a non-existent character loan where there is usually no collateral. A broker invents borrowers and similarities, establishes accounts for payments, and maintains custodial accounts for escrows. They may already set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency for verification purposes.
Foreclosure Schemes – Are one of the worst. The loan agents mislead the homeowners into believing that they can save their homes in exchange for a move of the deed, usually in the form of a Quit-Claim Deed, and up-front fees. The perpetrator profits from these schemes by re-mortgaging the character or pocketing fees paid by the homeowner without helping to prevent the foreclosure. The victim suffers the loss of the character in addition as the up-front fees. Be aware of offers that potential to save homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. If you are near a foreclosure seek a qualified credit counselor or attorney to assist.
Mortgage Scam per e-Mail – Many of the emails imply that the recipient has already been approved for a loan by making a vague statement such as “we are accepting your mortgage application”. Recipients may believe that they are truly being offered a loan. These emails are basically just poorly implemented tricks to get recipients to click on the link provided and fill out a form which in turn will defraud you in one way or another. If enough information is provided, scammers might already be able to steal your identity. A lot of the sites will last only a few days before they are taken down. But new will arise as soon as they are suppressed. Often they consist of just one page containing a form.