Identifying and Avoiding Mortgage Fraud

 

What is mortgage fraud?

Mortgage fraud is a material misstatement, misrepresentation, or omission of information relating to the property mortgage loan application. This is to obtain a loan or a larger loan than could have been obtained if only the lender or borrower have known the truth.

How to recognize the most common mortgage fraud?

1.    Reverse Occupancy Schemes

The borrowers say that they are buying an investment property and make the rent as income. But instead of renting the property, they will just occupy it as if it’s their home. The characteristics of this scheme are first time buyers with no established credit, who offer large down payment, and who provide a letter stating that they are living without a rent in their current residence.

2.    Foreclosure rescue

This kind of fraud occurs when a buyer buys a struggling homeowner’s property and rents it back to him or her, that it makes it, even more, harder for him or her to keep up with the payments. The characteristic of this scheme includes a borrower buying several rental properties in a short period of time or buying a property at a price below his or her current residence.

3.    Affinity fraud

This fraud involves misrepresentation of the buyer’s income or employment. This includes false bank statements, and forged verification of employment. The characteristic of this fraud may include a borrower with higher income which is not compatible with his or her education, age, or job experience.

4.    Air loan

This fraud involves a nonexistent property or a nonexistent borrower. This is usually a work of a group of professionals who fake documents or creates fake properties or fake borrowers. This is simply buying a nonexistent property, and the victim will just realize that he or she has been scammed after the payment.

5.    Land Fraud

This fraud occurs when the scammers have a list of potential homebuyers and sellers from mails and phones. They will contact each of the victims promising a huge amount of profits and gifts if they are going to buy the land from the company. But what they are actually selling are unimproved and cheap lots of lands, where they will sell it at very high costs.

6.    Counseling Agencies

You are led to believe that they can perform certain mortgage-saving services with a certain fee. However, these services are just simple tasks like discussing interest rates which you can avail freely in a government agency website.

 

 

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