Every mortgage scam contains some type of misstatement, misrepresentation or omission relating to an underwriter or lender financing, purchasing or securing a loan. Mortgage scams are easily practiced, especially when professionals in the mortgage industry are involved. The true level of mortgage fraud is largely unknown because a significant portion of the mortgage industry lacks mandatory fraud reporting, and additionally, secondary market mortgage fraud often goes unreported. According to various industry reports and analyses, mortgage scams are pervasive and growing. Mortgage scam can basically be analyzed as:
* For-Profit Fraud: Sometimes referred to as “industry insider fraud” and the motive is to falsely inflate property values, issue loans based on fictitious properties, or rotate capital. According to existing rough reports, eighty percent of all reported mortgage scam losses involve the collaboration or collusion of industry experts.
* Housing Fraud – An illegal action perpetrated solely by the borrower. This type of mortgage scam is carried out by a borrower who misrepresents their income or employment history in order to qualify for a large loan. The motive behind this scam is to acquire and maintain ownership of a home under false pretenses.
Fraud for Housing cannot be compared to the scam carried out by professionals in the mortgage scam industry targeting borrowers. Predatory lending typically targets seniors, low-income, and credit-troubled borrowers. Mortgage loan officers force borrowers to pay exhaustive loan payoff fees, subprime or higher interest rates and, in some cases, unreasonable servicing fees. The usual result is that the borrower defaults on their mortgage and suffers a foreclosure or forced refinancing. Our approach is to recognize the mortgage scam that could happen to us, the borrower.
MORTGAGE SCAM SCHEMES
False or Stolen Identity: A false identity can be used in the loan application. The applicant may be involved in an identity theft scheme and use someone’s personal information without the real person’s knowledge.
Inflated Appraisals – An appraiser colludes with a borrower and provides a misleading appraisal report to the lender. This report incorrectly indicates an inflated property value.
Silent Second Mortgage: A property buyer borrows the seller’s down payment by issuing an undisclosed second mortgage. The primary lender believes that the borrower has invested their own money in the down payment, when in reality it is a loan. The second mortgage cannot be registered to further hide its status from the primary lender.
Nominee Loans – The identity of the borrower is concealed through the use of a nominee which allows the borrower to use the name and credit history of the nominee to apply for a loan.
Equity Skimming: An investor can use an applicant, false income documents, and false credit reports to obtain a loan in the applicant’s name. After closing, the nominee relinquishes the property to the investor in a release of claim deed that relinquishes all rights to the property and provides no guarantee of title. The investor makes no mortgage payment and rents the property until the foreclosure occurs a few months later.
Property Flipping: A property is purchased, falsely advertised at a higher value, and then quickly sold. What makes this property illegal is that the appraisal information is fraudulent. The schemes usually involve one or more of the following; Fraudulent appraisals, falsified loan documentation and inflated buyer income… Bribery of buyers, investors, loan and property brokers, appraisers, title company employees are common in this scheme. A house may be valued at $100,000 but is actually worth $30,000.
Airline Loans – This is a non-existent property loan where there is usually no collateral. A broker invents borrowers and property, sets up accounts for payments, and maintains escrow accounts for escrows. They may even set up an office with a bank of phones, each of which is used as an employer, appraiser, credit bureau for verification purposes.
Foreclosure Plans: They are one of the worst. Loan officers trick homeowners into thinking they can save their homes in exchange for a transfer of the deed, usually in the form of a Quit Deed and Advance Payment. The perpetrator profits from these schemes by remortgaging the property or pocketing the fees paid by the owner without helping to avoid foreclosure. The victim suffers the loss of the property, as well as the fees up front. Be on the lookout for offers that promise to save homeowners who are at risk of defaulting on their loans or whose homes are already in foreclosure. If you are near foreclosure, find a qualified credit counselor or attorney to help you.
Email Mortgage Scam – 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”. Beneficiaries may believe that they are actually being offered a loan. These emails are basically poorly implemented tricks to get the recipients to click on the provided link and fill out a form which in turn will scam you in one way or another. If enough information is provided, scammers could even steal your identity. Many of the sites will only last a few days before they are removed. But new ones will emerge as soon as they are suppressed. They often consist of a single page containing a form.
There is no information about the company that offers the service, no privacy policy, no legal document, no contact options other than the form provided. Often the form is not secure (https), which is a good indicator that the site is not legitimate. No credible company would expect potential customers to submit information via an unsecured form. Never deal with spammers, no matter how attractive their offer may seem. If they are unscrupulous enough to send spam, or allow their affiliates to send spam, they immediately proved untrustworthy and you should avoid them at all costs. In general try to avoid using home loans online.