The Facts about Mortgage and Foreclosure Frauds

Posted on February 28th, 2008 by saman

The definition of mortgage loan fraud is and intentional misstatement, or misrepresentation by someone applying for a loan. Lenders rely on proper information to grant loans for home purchase. Statistics gleaned from different sources say that mortgage fraud incidents are increasing. Explanations for this include in the price of homes and the induction of loans that require little or no documentation.

Mortgage fraud falls into two categories, fraud to make profit and fraud to acquire property. Fraud to acquire property involves minor misrepresentations by the applicant in order to purchase a property they can reside in. This scam involves a singular loan. Applicant may lie about income and conceal the debt that they have but they do intend on paying their loan. Fraud to acquire profit involves numerous loans and schemes used in order to gain ill gotten proceeds from the sale of property. This is the type of scam authorities are most concerned with. Misrepresentations concerning appraisal and loan documents are typical in these types of frauds.

A form of mortgage fraud is property flipping. This property flipping is illegal. The type of fraud known as property flipping involves the fake appraisal of a home. The way this work is the property flipper may buy a property for twenty thousand dollars. The flipper will have the property fraudulently appraised for eighty thousand dollars. The perpetrator will sell the property to a buyer who gets an eighty percent loan of sixty-four thousand dollars. This gives the flipper a forty-four thousand dollar profit. In the end the bank is left with a sixty-four thousand dollar mortgage on a twenty thousand dollar home. This results in a loss of forty-four thousand dollars.

People who are victims of mortgage fraud include borrowers, mortgage entities and people living in neighborhood that are affected by mortgage fraud. When someone commits mortgage fraud, lenders have to deal with foreclosure costs that are high, reappraisals, and other expenses related to the process. Some of the top areas of mortgage fraud are California, Georgia, Indiana, New York, Texas and Utah.

The next problem for lenders and homeowners is foreclosure fraud. Statistics suggest that the rise in foreclosures provide criminals with the chance to exploit and defraud homeowners who are vulnerable and who need financial guidance. Scammers convince homeowners dealing with foreclosure that they have the ability to save their homes through deed transfers. There services usually require an upfront fee. The “foreclosure rescue” offered will involve a deed process that is manipulated and that will result in forged deeds being prepared. In extreme cases, scammers will sell the home or obtain a second loan without the homeowner knowing of it. The property’s equity is stripped for personal enrichment. Foreclosure scams manifest in different ways but they can be used in concert with other types of fraud. For example, perpetrators may see foreclosure-rescue scams as a method to acquire property by fraud and bring about illegal equity skimming and property flipping.

There are different government agencies working to stop foreclosure and mortgage fraud.