Fraudulent Mortgage Brokers
When a party misrepresents information, facts, and figures to deceive another party, it is termed fraud. To put it simply, deliberate misrepresentation and deception refer to fraud.
What is Mortgage Fraud?
The FBI (Federal Bureau of Investigation) defines mortgage fraud as any type of material misstatement, misrepresentation, or omission which relates to a property or potential mortgage which is relied on by a lender or an underwriter to purchase, fund or insure a loan. As you can see, this definition says that individual borrowers, as well as industry professionals, may commit mortgage fraud.
Mortgage fraud is treated as a serious offense in the United States. In fact, convicted offenders can expect jail time. Federal as well as state laws in the U.S. state that mortgage fraud can result in up to $1 million in fines as well as up to 30 years in federal prison.
Types of Mortgage Fraud
- Appraisal fraud – In this type of fraudulent mortgage, a team of professionals tries to make a home seem like it’s worth more than it really is. All of the people involved in the scam stand to gain by earning more money from a higher sales price.
- Air loans – To put it simply, air loans are loans which land on your lap from thin air. In this type of fraudulent mortgage, a broker will give out a loan for a building which doesn’t exist while using the names of people that he/she has made up. Fraudulent mortgage brokers stand to gain a lot of money from these properties which don’t exist.
- Identity theft – When it comes to fraudulent mortgages, identity theft is quite simple to understand. It occurs when a person steals another person’s personal information so that he/she stands a better chance of being approved for a loan.
- Illegal property flipping – It is legal to buy a property, make upgrades and then sell it to make a profit. However, it is illegal to buy a home and then sell it after making use of a fraudulently high appraisal value or by making use of fake details on documents for the mortgage loan.
- Foreclosure rescue schemes – This type of scam usually makes its presence known when people are going through a foreclosure. In this scam, the scammer will attempt to assist you by asking to put their name onto the deed of the property so that they may make mortgage payments in your stead. However, this is very risky as once the scammer’s name is on the deed, he/she may sell the property to make a profit while neglecting all necessary payments.
- Loan modification schemes – This type of scam targets homeowners who are finding it difficult to make their monthly mortgage bills. The scam works by asking the homeowner to pay the person fees with the scammer promising to help readjust the terms of the homeowner’s loan terms to work to the homeowner’s favor.
Why is Fraudulent Mortgage a growing problem in the U.S.?
CoreLogic released data which shows that mortgage fraud increased by 16.9% in the second quarter of 2017 versus the same quarter in 2016. There are many reasons for the rise of mortgage fraud with one of them being a higher demand for homeownership.
U.S. Census data released in January 2018 revealed that homeownership rates hit 64.2% in the U.S. In fact, it has been on the rise since 2016. The demand is there which makes it an attractive option for fraudulent mortgage lenders.
As you can see, fraudulent mortgage lenders are a problem in the U.S. The key to smelling out fraudulent mortgage lenders is having realistic expectations for the whole borrowing as well as homeownership experience.