Mortgage Fraud and Its Different Forms- By: Roby Hicks
The real estate industry is in such a mess because of many wrong decisions and fraudulent activities. There are several types of mortgage fraud that have lead lenders to lose a lot of money and even go out of business. This is why it is essential that we learn about mortgage fraud and its effects. This does not only damage the real estate industry, this can also lead to a lot of problems in the economy.
There are several types of mortgage fraud. The usual victims are the lenders, as borrowers and other real estate professionals work together to acquire money from them.
Fraud by borrowers
The borrowers can participate in this type of fraudulent scheme in different ways. There are even instances when they are committing the act without knowing it. Simple alteration of certain information can be considered mortgage fraud especially if they have significant effect on the mortgage and the term. Many would present wrong information regarding their employment as well as their income to receive 100% financing for the purchase.
Borrowers will also be held responsible for undisclosed information. There are several instances that a buyer may hide crucial details from the lender. Examples of this are kickbacks or the money received by the buyer from the seller. It could also be that the buyer and the seller have deals. In most cases, the seller pays for the down payment, provided that the buyer will pay him through a second mortgage. The buyer commits fraud if he does not disclose this to the lender.
Fraud by real estate professionals
As mentioned earlier, borrowers are not the only culprit. In fact, such schemes are usually pulled off by a group of real estate professional like appraisers, brokers, real estate agents and the like. Flipping is among the most common types. Here a property is purchased, improved and sold. There is nothing wrong with that unless the people involved lie about the real value of the property and its improvements.
Another form of fraud takes place when a straw buyer is used. This is normally done when the buyer who wants to make a purchase is not qualified. Here the information of the straw buyer is used to have the approval of the lender. They would claim that the property will be rented and the payment of the tenant will be used to pay for the mortgage, which never happens and the property forecloses in three months, more or less.
An appraiser may be used for this as well. He will be asked to give a false value of the property, which is higher than its actual value. This will enable the borrower to get more money from the lender. Once he gets the loaned amount, he pays the appraiser and the other parties involved in the scheme. The borrower will not pay the lender and the property forecloses again in no time.
Although lenders are the usual victims of mortgage fraud, homeowners can become victims too. Most of the time, property owners who are at risk of foreclosure, are contacted by con artists to offer help. The fraudsters will claim that they can make the debt go away for a fee. Once they get your payment, they disappear.
If you do not want to be a victim of the mortgage fraud, be vigilant. If you suspect such scheme, report it to authorities right away.
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