A mortgage is a security interest that attaches to real property. The property serves as collateral for the repayment of the mortgage loan that an individual took out in order to pay for the property. A mortgage is obtained through a mortgage lender, typically a bank.
When an individual wishes to purchase property but they do not have enough money available to do so, a bank or other lender will provide the funds to purchase it. A mortgage is placed on the property so that in the event an individual defaults on their loan, the bank or financial institution will have the right to take possession of that property.
The mortgage transaction involves two important documents, which are the promissory note and the mortgage, also called a deed of trust. A promissory note is a type of contract. The terms of the promissory note usually state that one party will promise to repay a specific amount of money to the lending party, such as a bank, in a given time frame. A promissory note holds the borrower responsible for repaying the loan even if they sell the property.
The mortgage, or deed of trust, is a document that acts as a lien on the property. If the borrower does not repay the loan, the financial institution that provided the money may force the borrower to repay the loan by selling the property. The deed of trust guarantees that the lending institution will get its money back even if it is not the borrower who makes the payments.
What is Mortgage Fraud?
Mortgage fraud includes any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan. Mortgage loan fraud in the basic sense involves an individual making a misstatement to a lender in order to obtain a mortgage.
A simple form of fraud such as this may take on multiple forms. Any misstatements, misrepresentations, or omissions may become fraud in the right context. Even a slight exaggeration on an individual’s loan application may be considered fraud.
Even if it occurs unintentionally, mortgage fraud can have serious consequences. If a lender discovers any part of a loan application is false, it may demand immediate and full repayment of the mortgage loan. Additionally, mortgage fraud is a crime.
Mortgage is commonly thought of in the context of a homebuyer providing false information on a loan application in order to obtain the loan. In reality, there are two different main types of mortgage fraud, one involving fraud on the lender’s part.
The most common type of fraud is where a borrower makes a misrepresentation on their application in order to obtain or maintain ownership of the real property. Fraud for profit, however, is typically committed by mortgage industry insiders with specialized knowledge about the industry as well as its rules and regulations. Fraud for profit is used to abuse the system in order to steal funds and equity from lenders or homeowners.
Any type of mortgage fraud is considered a serious criminal offense. It is usually charged as a felony. Punishment upon conviction may include 30 years in prison and up to $1 million in fines. The Federal Bureau of Investigation (FBI) considers fraud for profit a higher priority for investigation than fraud for housing.
Recently, mortgage loan fraud has become one of the fastest growing types of white-collar crime. Mortgage fraud most commonly occurs when someone makes a misstatement to a lender in order to obtain a mortgage. In addition, the recent increase in the number of foreclosures has provided criminals with another opportunity to make a quick profit at a homeowners’ expense.
What is a Foreclosure?
A foreclosure is an event that can be devastating. Foreclosure means an individual loses their home and finds themself in an unhealthy financial situation.
Foreclosure occurs when a homeowner is unable to make the required monthly mortgage payments required by the lender. After a certain number of missed payments, they are evicted from the property by the lender. The lender has the authority to foreclose due to the contract signed by the buyer of the home or property and the seller or lender. The property serves as a collateral for the loan.
There are some lenders that allow a grace period in which the mortgage payment can be made prior to a foreclosure occurring. However, this is a short period of time, usually only a couple of months. Typically, if a borrower is behind on their payments, it is difficult to catch up due to late fees.
What are the Different Types of Foreclosure Fraud?
There are several different types of foreclosure fraud. They all take advantage of a vulnerable homeowner who is desperate to avoid losing their home. One common type of foreclosure fraud occurs when a scammer makes a promise to stop the foreclosure for a fee, does nothing, and pockets the payment.
A more extreme type of foreclosure fraud occurs when a scammer promises to pay off a mortgage while allowing the homeowner to remain on the property as a renter, with the option to purchase back the property at a later time.
However, as part of the agreement, the homeowner must deed the property to a new borrower who claims to be investing in the property but is actually part of the scam. The individual strips the home of its equity and the scammers disappear. In the end, the homeowner is now only a renter of a home they no longer own and will eventually be evicted.
Another common type of foreclosure fraud occurs when a foreclosure predator simply signs documents in a homeowner’s name without their knowledge. They may also trick a homeowner into signing documents prior to altering the document to suit their fraud scheme.
An individual may also encounter foreclosure fraud when they are contacted by an individual or group of individuals claiming to be mortgage counselors or consultants. They charge fees for their services to a homeowner facing foreclosure. These services will be services the homeowner could have obtained elsewhere, free of charge.
How Can I Avoid Being a Victim of Foreclosure Fraud?
There are ways an individual can avoid being a victim of foreclosure fraud. It is important to remember that if something seems too good to be true, it probably is. An individual should be careful whom they trust, especially in cases where someone is offering to alleviate any or all of a mortgage debt.
An individual should ensure they are familiar with the mortgage and foreclosure processes. They should also only work with trustworthy professionals and companies. If they are unfamiliar with the individual or business that is offering to help, the borrower should research them.
An individual should always read any documents prior to signing them. It is best to have an attorney review them as well prior to signing. Most importantly, an individual should pay attention to their instincts, if something seems unusual, research the issue further and contact an attorney.
Should I Consult a Lawyer for Mortgage and Foreclosure Fraud Issues?
Yes, it is essential to have the assistance of an experienced criminal fraud attorney for mortgage and foreclosure fraud issues. An attorney can review your case and determine what actions may be taken against the lender, and represent you during any court proceedings, if necessary.
If you have been accused of loan fraud, it is essential to have the help of an experienced criminal fraud attorney to protect your rights, advise you on the best way to move forward with your case, and represent you during any court proceedings, if necessary. It is important to hire an attorney as soon as you possibly can in order to avoid major financial issues or a criminal conviction.