There’s no getting around the fact that qualifying for a mortgage has become more difficult. Although most home buyers accept their mortgage fate handed to them by underwriters, some are tempted to embellish their mortgage application so as to appear more qualified to receive a loan. Even though you may be tempted to cross over the line, don’t give in to temptation just to buy a home.
If you think that mortgage fraud is only about taking part in some elaborate conspiracy with others for financial gain – think again. “Fraud for profit” typically involves “Gross misrepresentations concerning appraisals and loan documents…”; and is one of two categories of mortgage fraud described by the Federal Bureau of Investigation’s latest mortgage fraud report, titled “2009 Mortgage Fraud Report ‘Year in Review’”(FBI.gov).
The other category is “Fraud for property;” and entails the exaggeration of personal information that is included in a mortgage application (including providing false supporting documents) to buy a home. If you think that fudging a little on your mortgage application won’t hurt anyone because you intend to repay the loan, think again. The FBI states that mortgage fraud “is a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan…”
Since the FBI reports that the usual suspects perpetrating mortgage fraud are typically “industry insiders” (such as lenders, appraisers, underwriters, real estate agents, settlement attorneys, etc.), it is possible that your loan officer or real estate agent might attempt to “recruit” you to be a participant or victim of mortgage loan origination fraud. Mortgage loan origination fraud involves falsifying a borrower’s information to increase the likelihood of qualifying. Besides falsifying information such as bank statements, W-2 forms, and tax returns; mortgage origination fraud could also include the use of a false identification, false asset rentals, backward applications, and the use of credit enhancement schemes.
Additionally, affinity fraud is reportedly a growing issue, such that co-conspirators are often recruited within the same ethnic group or gang. Although, affinity fraud could be an element of any mortgage fraud scheme, it is sometimes devised to launder money.
To alert consumers, the FBI’s mortgage fraud report also cites emerging trends. The list includes schemes such as commercial mortgage loan fraud, condominium conversion fraud, bankruptcy fraud, foreclosed property theft/fraudulent leasing, tax-related fraud, the resurgence of debt elimination/redemption schemes, first time homebuyer tax credit schemes, and flopping/short sale fraud (fraudulently lowering the value of a distressed property).
The FBI’s assessment is that mortgage fraud activity is likely to persist due to continued poor economic indicators (including employment and housing). The environment is not only ripe for perpetrators to implement the typical mortgage frauds (such as loan origination fraud); they are also devising new ways to circumvent mortgage guidelines and laws for personal gain. The FBI states that detecting fraud can sometimes lags behind industry indicators for up to two years, so increased fraud reporting efforts will not indicate any immediate changes.
Don’t let your desire for the American Dream turn into a nightmare. If you suspect that you are a victim or are being recruited for mortgage fraud, file a report with the local FBI field office. Additional resources are offered by the Financial Fraud Enforcement Task Force website, StopFraud.gov; including how to report suspected mortgage fraud.
By Dan Krell
Copyright © 2011
Original published at https://dankrell.com
This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.