Common Examples of Mortgage Fraud

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What is Mortgage Fraud?

Providing false or incorrect information on a loan application is mortgage fraud. According to the FBI, mortgage loan fraud is one of the fastest growing forms of white collar crime in the United States. While mortgage fraud comes in a number of different forms, some types are more commonplace than others.

  1. Income Fraud – One of the most common forms of mortgage fraud involves the borrower overstate his or her income. This allows the borrower to qualify for a higher loan.
  2. Loan as Gift – Often people will borrow money from their family in order to make a down payment on a property. However, treating this as a gift reduces the amount of debt you appear to have, possibly causing the lender to approve a loan it would otherwise reject.
  3. Occupancy Fraud – This is when a borrower wants to obtain a mortgage in order to purchase an investment property, but claims that they will actually live in the property.  Lenders usually charge higher interest rates for investment property mortgages, since these are considered riskier loans for lenders.
  4. Appraisal Fraud – This occurs when home’s value is deliberately or fraudulently understated or overstated. When the value is overstated, more money can be obtained. The value is then understated in order to get a lower price on a foreclosed home.
  5. Employment Fraud – This occurs when a borrower claims to be self-employed in a non-existent company or claims a higher position in real company in order to misrepresent their income for purposes of obtaining a mortgage.
  6. Fraud for Profit – A complex profit scheme, fraud for profit involves multiple professional mortgage lender professionals in an attempt at defrauding the lender of large sums of money. Individuals who may be include a straw borrower, a dishonest appraiser, and a dishonest settlement agent all working to get an under-served large loan.

Prevention

It is important to note that many people who commit mortgage loan fraud do so at the urging of a real estate agent hoping to close a deal.  If you have any questions or concerns about mortgage fraud, it is a good idea to consult with an experienced criminal defense attorney or real estate attorney before making a potentially disastrous mistake.

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Last Modified: 08-05-2013 03:38 PM PDT

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