Mortgage fraud is one of the fastest growing crimes in the United States. Mortgage fraud comes in many different forms and can be caused by any of the parties involved in the mortgage process. Buyers, sellers, investors, developers, real estate agents, and lenders can all be a part of mortgage fraud.
Mortgage fraud may include, but is not limited to:
- Credit or income misrepresentation by the borrower
- Asset and down payment misrepresentation by the borrower
- Misrepresenting oneself on the mortgage application in any way
- Property flipping
- False or inaccurate appraisals
- Equity skimming
- Foreclosure rescue schemes
- Short sales
- Reverse mortgages
There are generally three types of mortgage fraud.
Fraud for housing or property:
This type of mortgage fraud is generally committed by borrowers. Fraud for housing often includes the borrower providing false or inaccurate information about employment, income, credit, or assets so they can qualify for a mortgage loan. This happens fairly frequently so a borrower can qualify for a larger loan amount than they would if they accurately represented themselves. Sometimes, the loan officer gets involved and encourages this type of fraud.
Fraud for profit:
This type of mortgage fraud is also known as “industry insider fraud.” This is the most costly type of mortgage fraud. These scams often involve a group of people. The initiators often receive a large percentage of the profit while others who are involved may be paid a smaller amount for their involvement in the misrepresentation. This type of mortgage fraud usually involves multiple industry professionals and is usually committed throughout multiple transactions. For example, a mortgage broker may partner with a loan processor to create a fictitious credit profile then join with an appraiser to inflate a property’s value. The borrowers can often be unaware that any of this is going on. However, participants may include straw borrowers who do not intend to repay the loan.
Fraud for criminal enterprise:
Fraud for criminal enterprise involves participants attracted by the opportunity for greater profits. Perpetrators of fraud for criminal enterprise can include members of crime organizations who temporarily conceal the identity, source, and/or destination of money by laundering it through real estate transactions. Property flipping is the fraud scheme often employed in this method.
To protect yourself, learn to recognize the signs of mortgage fraud. If you suspect mortgage fraud, contact the FBI.