Mortgage Fraud Remedies
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What Is Mortgage Fraud?
Mortgage fraud occurs when an applicant for a home loan or loan modification lies, misrepresents the truth, or omits material information from the mortgage application in order to receive a more favorable home loan offer. The lender relies on this application when determining the amount approved for financing, the interest rate, the pay-off period, and any other terms. Lies, misrepresentations, and omissions are all different forms of fraud.
This type of fraud is a crime that also incurs civil penalties if the lender decides to file a lawsuit. In short of a civil lawsuit, the mortgage lender may demand payment in full by accelerating your payments when it detects fraudulent activity.
Lenders also perpetrate mortgage fraud. Often, lenders will agree to fudge numbers on applications for applicants in order to help them obtain approvals with otherwise low credit scores or incomes. Mortgage loan fraud on behalf of the lenders was the primary cause of the housing market crisis that eventually led to the recession in 2008.
Common Mortgage Fraud Schemes
Common examples of mortgage fraud include:
- Overinflating income
- Misrepresenting or lying about employment status
- Misrepresenting or lying about residency status
- Failing to disclose key information such as what the property is to be used for or the presence of a second lender
- Using another person’s social security number or name to obtain a more favorable credit score
Lenders are also guilty of intentionally lying, misrepresenting, exaggerating or omitting essential information on the application. In addition, lenders often:
- Change application information to be more favorable without the applicant’s knowledge or consent
- Approve sub-prime borrowers for amounts they cannot conceivably pay off
- Collude with the home inspector to approve defective or dangerous homes for loans
- Inflate the value of a property
Mortgage Fraud Remedies
If you have been scammed by a mortgage lender, there are remedies available to help fix the situation. Although the remedies that are available to you will vary by your jurisdiction, they may include:
- Injunctions to stop the sale or purchase of a home based on forged or fraudulent loan applications
- Injunctions that require a second, independent home inspection
- Monetary damages
- Punitive damages
- Criminal prosecution against the lenders
Do I Need a Lawyer If I Have Been the Victim of Mortgage Fraud?
Mortgages are high-value loans. You do not want to be stuck in a long-term, high-value home loan with a dishonest lender. There are federal and state laws designed to prosecute and fine lenders who engage in kickbacks and fraud. A knowledgeable real estate lawyer can advise you on your various legal options, available remedies, and best course of action given your circumstances.
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Last Modified: 10-03-2016 02:44 PM PDT
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