In today’s economy, some people are resorting to different means to try and get out of their financial situation. Many shady lenders who have got themselves into trouble are resorting to less than honest means to try and recover from today’s problems. When it comes to getting a mortgage, you should know that an informed applicant is best. By being informed and knowledgeable you will protect yourself from less than honest lenders. It has been estimated that losses resulting from fraudulent mortgage practices are totaling around $3 billion dollars and growing. Although the Federal Government is aggressively working on the problem, it has been on the rise and is found nationwide. No segment of the population is left out but it is most commonly found on First Time Home Buyers, Seniors and those struggling to make their mortgage payments and in a hurry to sell their home.
Mortgage Fraud is a scheme by a lender or other interested parties misrepresent, deceive or omit information to make it possible to get a loan. Although this sounds like a good thing for some home buyers attempting to buy a home, it leaves behind a mess for those involved in this scam. There are generally higher cases of foreclosures, defaults and delinquencies with these scams. There are also increased expenses such as higher attorney fees, broker commissions and foreclosure costs. These things cause inflated real estate prices that are not real and will impact property values with inflated property taxes making it more difficult to sell homes in the areas affected.
Mortgage Fraud basically falls into two categories:
1. Fraud for housing or fraud for property scams. These types of scams are designed to help a borrower get ownership of property that would generally be unaffordable to them. The scam will be to get false information regarding employment, assets or income. Sometimes there are mortgage industry representatives working with the borrower to aid and assist the borrower to get that false information.
2. Fraud for Money scams. This type of fraud is sometimes referred to as “Industry Fraud” since there are generally multiple loans and a group of individuals involved in defrauding a mortgage lender or prospective homeowner in issuing loans on fictitious real estate or inflating property prices. The person perpetrating the scam will generally use a few different methods in using this scam. They will use identity theft, false information on loan documents and appraisals and finally illegal property sales which will include false appraisals and selling of a home at a higher cost to help inflate prices. There are also “Straw Buyers” that will lend their good credit and identity to these schemes in exchange for money and/or property.
Mortgage lenders that often cater to home buyers with bad credit generally are where the fraud occurs but that is not an exclusive area. These people that commit Mortgage Fraud can be found everywhere but generally prey on homeowners or buyers who are in precarious financial situations. They will also use some unsavory lending practices such as charging excessive fees, additional points and higher interest rates.