Each mortgage scam contains some type of misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. Mortgage scam is easily practiced particularly where mortgage industry professionals are involved. The true level of mortgage scam is largely unknown because a significant portion of the mortgage industry is void of any mandatory fraud reporting and in addition, mortgage fraud in the secondary market is often under reported.
Based on various industry reports and analysis, mortgage scam is pervasive and growing. Mortgage scam can be basically analyzed as: * Fraud for Profit - Sometimes referred as "Industry Insider Fraud" and the motive is to falsely inflate the value of the property, issue loans based on fictitious properties or revolve equity. Based on existing approximate reports, eighty percent of all reported mortgage scam losses involve collaboration or collusion by industry insiders * Fraud for Housing - An illegal action perpetrated solely by the borrower. This type of mortgage scam is done by a borrower who makes misrepresentations regarding his income or employment history to qualify for a large loan. The motive behind this scam is to acquire and maintain ownership of a house under false pretenses Fraud for Housing can not be compared to the scam done by mortgage scam industry professionals which affect the borrowers. Predatory lending usually is targeted towards senior citizens, lower income and challenged credit borrowers.
Mortgage lending representatives force borrowers to pay exhaustive loan settlement fees, sub-prime or higher interest rates, and in some cases, unreasonable service fees. The usual result is the borrower defaulting on his mortgage payment and undergoing foreclosure or forced refinancing. Our focus is to recognize the mortgage scam that could happen to us, the borrower. MORTGAGE SCAM SCHEMES False or Stolen Identity - A fake identity may be used on the loan application. The applicant may be involved in an identity theft scheme and use someones personal information without the true person's knowledge. Inflated Appraisals - An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender.
This report inaccurately states an inflated property value. Silent Second Mortgage - Buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender. Nominee Loans - The identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee's name and credit history to apply for a loan. Equity Skimming - An investor may use a nominee, false income documents, and false credit reports, to obtain a loan in the nominee's name.
Subsequent to closing, the nominee signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place a few months later. Property Flipping - A property is bought, falsely advertised at a higher value, and then quickly sold. What makes this property illegal is that the appraisal information is fraudulent.
The schemes typically involve one or more of the following; fraudulent appraisals, doctored loan documentation and inflated buyers income. Kickbacks to buyers, investors, property and loan brokers, appraisers, title company employees are common in this scheme. A home may be appraised for $100,000 but is actually worth $30,000. Air Loans - This is a non-existent property loan where there is usually no collateral.
A broker invents borrowers and properties, establishes accounts for payments, and maintains custodial accounts for escrows. They may even set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency for verification purposes. Foreclosure Schemes - Are one of the worst. The loan agents mislead the homeowners into believing that they can save their homes in exchange for a transfer of the deed, usually in the form of a Quit-Claim Deed, and up-front fees. The perpetrator profits from these schemes by re-mortgaging the property or pocketing fees paid by the homeowner without helping to prevent the foreclosure. The victim suffers the loss of the property as well as the up-front fees.
Be aware of offers that promise to save homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. If you are near a foreclosure seek a qualified credit counselor or attorney to assist. Mortgage Scam per e-Mail - Many of the emails imply that the recipient has already been approved for a loan by making a vague statement such as "we are accepting your mortgage application". Recipients may believe that they are actually being offered a loan. These emails are basically just poorly implemented tricks to get recipients to click on the link provided and fill out a form which in turn will defraud you in one way or another.
If enough information is provided, scammers might even be able to steal your identity. A lot of the sites will last only a few days before they are taken down. But new will arise as soon as they are suppressed. Often they consist of just one page containing a form.
If they are unscrupulous enough to send unsolicited email, or allow their affiliates to send unsolicited email, then they have immediately shown themselves to be untrustworthy and you should avoid them at all cost. In general try to avoid the use of online mortgage loans.
Urban is the author of Mortgage Scam and Home Mortgage Fraud