5 Tips to Halt Mortgage Fraud in its Tracks

Posted on Feb 17 2016 - 4:26pm by Suzanne De Vita

FraudPredatory lending has declined sharply in the years since Dodd-Frank, but it, and other types of mortgage fraud, still steep into housing even today and affect every stage of the homeownership cycle.

Mortgage fraud, an umbrella term, is “a crime characterized by some type of material misstatement, misrepresentation, or omission on a loan which is then relied upon by a lender,” according to the FBI. It generally falls into one of two categories: fraud for profit and fraud for housing. Fraud for profit crimes are typically committed by those within the industry; fraud for housing crimes are committed by borrowers.

Mortgage fraud includes:

  • Air Loans
  • Builder Bailouts
  • Condo Conversions
  • Equity Skimming
  • False Commercial Leases
  • False Residential Loans
  • Foreclosure Rescue Scams
  • Fraudulent Appraisals on Flips
  • HECM (Reverse Mortgage) Scams
  • Loan Modification Scams
  • “Silent Second” Mortgage Schemes

Many of these crimes are sophisticated in nature, and homeowners and homebuyers easily mistake them for legitimate actions.

Read More: Don’t Let a Rental Scam Ruin Your American Dream

Don’t become a statistic—avoid mortgage fraud with these 5 tips :

  1. Ask your REALTOR® to refer you to a reputable lender. Consult your local regulatory agency to confirm the lender’s licensing and other credentials.
  1. Be honest and transparent when completing a loan application. Do not include false information in the application, even if another party attempts to convince you otherwise.
  1. Read (and re-read) all mortgage documents before signing them, or have a third party review them with you. Assess the information in the documents for accuracy. Do not sign documents that are blank or incomplete.
  1. Consult property records and review tax assessments and title history before purchasing a home. Conduct your own research on comparable home sales in the neighborhood to validate pricing.
  1. Steer clear of too-good-to-be-true offers, like “no money down” loans or claims to help homeowners profit or eliminate debt overnight. These offers, often made with high-pressure sales tactics, can come in the form of unsolicited phone calls and emails or online advertisements. Do not pay upfront or advanced fees for these offers. Do not sign over the deed to your home, even if facing foreclosure.

2 Comments so far. Feel free to join this conversation.

  1. Jen - Fraud June 30, 2016 at 4:27 pm -

    I couldn’t agree more. I’m sure a lot would benefit from your list of tips. It is unfortunate that some people turns to scamming to earn a living without thinking about the repercussions of their actions.

  2. Darrin Roseborsky June 21, 2017 at 10:24 am -

    The tips you have shared in the post should be read by almost every homeowner looking for a mortgage so that they can be aware of the scams and make sure that they don’t become the victim somehow. Homeowners should contact licensed mortgage brokers instead of general brokers, check for their past works, reviews online and BBB too.