What Are Mortgage Frauds?
Mortgage fraud occurs when someone pretends to be an authorized buyer when they are in fact an unauthorized buyer. This is done in order to skirt the Real Estate Settlement Procedures Act (RESPA) and prevent foreclosure. Fraudulent mortgage brokers use various methods to try and defraud lenders to give them a shot at a home loan. There are four distinct types of mortgage fraud that can take place. They include: false advertising, loan or lease misrepresentation, false appraisals, and false recording of loan closings. Mortgage fraud is a very serious crime in today's world and should not be taken lightly.
It is important to understand that mortgage fraud schemes are becoming increasingly sophisticated. In the past, perpetrators would merely fabricate documentation or outright steal real estate. These days, however, there are many more ways for criminals to commit mortgage fraud. Some of the most common techniques include:
False advertising. Sometimes mortgage fraud happens when lenders are advertising for loans that are impossible to obtain. For example, a lender may advertise that a borrower needs to own a second house but cannot meet this requirement due to poor credit. To understand more on the silent second mortgage fraud, click here now.
Others may advertise a special finance rate when a regular mortgage is available with a lower interest rate. If you ever fill out a mortgage application online, fill out the necessary documents, and expect your mortgage lender to tell you upfront that you will likely be required to pay high interest rates due to your credit issues, you probably have been defrauded.
Loan or lease misrepresentation. Another popular mortgage scheme is the so-called subprime mortgage loan or the "under-the-table" loans. Some borrowers who are looking to purchase homes that will go into investment property will apply to a bank or other financial institution that specializes in commercial real estate loans. Unfortunately, when the bank or company that issued the loan finds out that the applicant does not actually live in the home, they will be required to turn around and sell the home and recoup their investment.
Mortgage referral. One type of mortgage fraud occurs when a lender or mortgage broker provides information about a borrower that is inaccurate and causes the under-writer to approve a mortgage for that person. Browse at: mndefenselawyer.com/practice-areas/mortgage-fraud for more information this topic.
For example, if the lender has information indicating that the applicant qualifies for a certain rate, but the applicant does not meet that criteria because he or she lives in another state, the lender could submit the incorrect information to qualify for the mortgage.
Straw purchase. Stealing a mortgage can also take place through illegal property flipping. Known as "straw purchase" scams, straw purchasers work with buyers who are willing to invest money in an investment property. The buyer signs a promissory note, and provides a straw to the seller to secure the loan. Once the loan is secured, the seller sells the property to another party, sometimes using the title of the buyer as security. This can make it easier for the seller to flip the house, since the title is now in his name. Check out this blog to get enlightened on this topic: https://en.wikipedia.org/wiki/Law_firm.
