Did you know that Florida is one of the worst states for mortgage fraud? In fact, the mortgage fraud levels in Florida are three times higher than the national average!
What is Mortgage Fraud?
The FBI says this about mortgage fraud: “It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender.” Any lie meant to deceive the bank into providing a mortgage loan is considered mortgage fraud.
Victims of this crime can be devastated financially. Those who are already down on their luck financially are most commonly targeted for mortgage fraud. Knowing the common schemes perpetrated by these criminals can save you money and give you peace of mind.
Lenders and buyers alike can commit mortgage fraud. Beware, and know that mortgage fraud is considered a very serious crime. If you are caught committing fraud, you can be charged with a felony.
Two Types of Mortgage Fraud
Generally, there are two motivations for mortgage fraud, for profit or for housing:
- For profit – This type of fraud is generally committed by lenders and industry insiders. They take advantage of their knowledge of the mortgage industry and manipulate it for monetary gain. The FBI prioritizes this type of fraud.
- For housing – Typically committed by the borrower in an effort to acquire a loan so that they can buy a house.
Common Mortgage Schemes
Knowing the types of schemes out there can protect you from falling prey to predators, or making a mistake yourself.
- Inaccurate income statements – If you are self-employed and fail to accurately report your income in order to receive a loan, you are committing mortgage fraud. The lender takes into account your income when giving you a loan. By inflating your income to receive a larger loan, you are defrauding the lender and increasing the chances that you default.
- “Under the table” down-payments – Sometimes a seller, desperate to sell their home, gives the home-buyer money for the down-payment that the buyer can’t afford on their own. The larger down-payment can sway the lender to provide a loan to the buyer who cannot truly afford the home.
- Giving the down-payment as a gift – Legally you are allowed to take money given to you as a gift and using it toward a down-payment for a home. However, if you pay back that “gift” under the table once the home is purchased, you are committing fraud.
- Not really occupying the home – If you own a home, but do not live in it, chances are the bank will charge you a higher interest rate on the loan. Claiming you live in a home to receive a lower interest rate, when you live somewhere else, is committing fraud.
Committing borrower fraud to buy a home is not worth the pain you could be causing yourself. Even if the authorities do not catch you, you are setting yourself up for potential financial disaster.
Buying a home you cannot truly afford puts you at significant financial risk. Rather than rush to get a mortgage, take your time, save, and enjoy the benefits of getting a mortgage you can truly afford.
Lender fraud can make victims of either homeowners or lenders. There are many variations of these schemes, so it is important to be wary. Take caution if someone offers you something that seems too good to be true – it probably is.
- Foreclosure “rescue” – If you are at risk of foreclosure and someone offers you a way out, beware! The defrauder will offer to save your home by taking the deed to the home and transferring it to an investor. They then have the homeowner pay them rent while they “re-establish their credit.” Unfortunately, the money you pay this investor is not going toward the mortgage and the house usually forecloses within a year.
- Loan modification – This scheme is very similar to foreclosure rescue. If you are at risk of foreclosure, someone will come to you offering to negotiate a more favorable mortgage loan on your behalf. They charge you large fees upfront, and then do not act, or negotiate bad terms, allowing the bank to foreclose on your home.
- Air loans – This type of fraud defrauds the lender more than a homeowner. Someone creates a fake borrower who requests a mortgage loan with no collateral. They fabricate employers, credit agencies, appraisers, and more to convince the lender that this is a real person. The lender gives a loan to this fake borrower and the defrauder takes the money.
Work with a Mortgage Company You Can Trust
When it comes to getting a home, it can be the most significant and rewarding purchase in your life. Working with someone you trust provides peace of mind. Our mortgage professionals are experienced and know how to guide you through the home buying process. Don’t allow yourself to fall victim of predators looking to defraud you. Work with a mortgage company you can trust!