Home equity fraud is a type of real estate fraud. Real estate fraud occurs when one party intentionally uses false information or makes a false representation relating to real estate. Real estate fraud can occur in many forms, including fraudulent transfer of title of real property, recordation of fraudulent real estate documents, mortgage foreclosure consultant fraud, or home equity sales contract fraud.

In general, home equity fraud occurs when someone tries to steal the equity a homeowner has built up in her home.

How is Home Equity Fraud Achieved?

Home equity fraud can occur in any number of ways. However, the most common type of equity fraud occurs when a homeowner takes out a home equity line of credit (also known as a “HELOC”). Criminals may use several different methods to rob HELOC accounts, but the most common method includes identity-theft scams. Specifically, criminals pose as homeowners who are eager to take out a HELOC on their home.

They obtain the true owner’s information through public records and establish a HELOC, forging the owner’s signatures and rerouting the loan so they receive the line of credit instead of the true homeowner. Because the documents checked for obtaining a mortgage are more comprehensive than what is required for obtaining a HELOC, it is much easier for criminals to commit this type of fraud.

Home equity fraud can also be committed by lenders when a homeowner is behind on her mortgage payments. The lender or financial agency may ask the homeowner to leverage amounts of money against their home in order to steal the home’s equity.

What are the Legal Consequences for Criminals Committing Home Equity Fraud?

Home equity fraud is illegal and may result in any one of the following consequences:

  • Criminal misdemeanor charges, which can lead to fines and jail time if the person is found guilty of committing home equity fraud
  • If the person committing the crime has a business or real estate license, she can lose her business or license

It’s important to note that home equity fraud can also lead to felony charges depending on the facts and circumstances. This can occur in situations where there is company-wide corruption or where the fraud is built into a company’s operating policies, but it also depends on the amount of money stolen. Many home equity lawsuits are also filed as class action suits if many consumers are affected all at once.

How Can I Protect Myself from Home Equity Fraud?

Home equity fraud has become increasingly common, but there are several ways you can protect yourself and the equity in your home. First, be wary if you have a lender who asks anything of you that seems “fishy” such as falsifying information about your home, mortgage status, loan history, or insists that you take out equity in your home in order to pay debt accrued from missed mortgage payments.

To reduce your risk of HELOC fraud, examine your credit reports to see if there is any inaccurate information. If you have taken out a HELOC, check your statements regularly.

Should I Contact an Attorney If I am the Victim of Home Equity Fraud?

Home equity fraud can involve some major legal issues and disputes. You may need to hire a mortgage attorney if you need help filing a lawsuit for home equity fraud issues. Your attorney can help determine whether you have a claim and what kind of options you have. In many cases, a monetary damages award can be claimed in order to make up for the losses caused by the fraud.