Report mortgage fraud

The real estate industry, like other financial industries, has its issues with scammers and fraud. The appearance of new scams and new versions of old scams make mortgage fraud a continuing problem for the industry.

report mortgage fraud
Mortgage pre approval

It’s not a victimless crime. You might think of those who are involved in a mortgage fraud scams as cheaters and criminals.  However, it is not uncommon for innocent consumers to get caught up in a mortgage fraud scam.  In the past, home flipping schemes ensnared unwitting consumers. During the great recession, mortgage modification and foreclosure rescue scams targeted unknowing homeowners.

The Federal Bureau of Investigation ( wants you to report mortgage fraud. The FBI describes mortgage fraud occurring “when someone lies to influence a bank’s mortgage decision or if a distressed homeowner is the victim of a fraud.”  There are two types of mortgage fraud, fraud for profit (such as home flipping schemes), and fraud for housing (such as mortgage application fraud). 

Application fraud is likely the most common mortgage fraud, as it can occur by any material misstatement, misrepresentation, or omission in relation to getting a loan.  “Occupancy fraud” is when a borrower lies to get a better interest rate by stating they will occupy the property when it’s intended to be a rental property.  “Employment fraud” is when a borrower lists an employer they don’t work for. “Income fraud” is when a borrower misrepresents their income to improve their profile for underwriters. 

Among the many types of mortgage fraud, one takes advantage of seniors with home equity conversion mortgages (also known as reverse annuity mortgage). The FHA underwrites a HECM for borrowers who qualify when they become 62 years old. The HECM provides homeowners access to home equity without payment until the borrower moves or dies. Scammers obtain a HECM in the name of a recruited homeowner to convert equity in the homes into cash. The scammers keep the cash and pay a fee to the senior citizen or sometimes just take the full payout. Sometimes, appraisals are inflated. This type of fraud is more difficult to detect because the lender usually doesn’t discover something is wrong until the home owner dies.

The FBI works with partners to investigate mortgage and financial institution fraud cases. Report mortgage fraud to the FBI (

By Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.