Types of Mortgage Fraud and Their Impact on the Property
June 23, 2021
A recent FBI report titled “2017 Mortgage Fraud Report” states that mortgage fraud has increased by 176%. That is a huge number. The FBI was also involved in 1,200 cases where an individual intentionally misrepresented information that a lender used to fund a mortgage loan. This understanding is essential to protect yourself from mortgage fraud. Hence, read the following several types of mortgage fraud and their impacts on the property.
Home-buyer fraud is when someone wants to buy a home they are comfortable with, but the lender won’t approve it when they have all the facts. This mentality is exacerbated by greedy lenders who turn a blind eye when they should question the information. For-profit fraud can be more complex. Sometimes it involves a group of people forging documents to obtain property. They then resell or empty the property. The lender runs out of capital. Sometimes appraisers, realtors, and lenders are also involved in the scam.
Buy and Hold Mortgage
This is especially feared by lenders. A homeowner can apply for a lower mortgage than what they are currently financing to get a better deal. The homeowner then submits a bogus lease and a tenant for the property they can’t afford. The new loan closes, and then the borrower defaults on the old loan. The lender has to foreclose because the borrower now has a new affordable mortgage.
Borrowers can use technology to create false income statements, tax returns, or pay stubs. Even the most experienced and knowledgeable underwriters or originators can’t tell the difference. Reverse mortgage appraisal fraud is another possibility. A bank will believe the property is worth less than it is when it has lower-than-usual property values. Banks are convinced by the appraisal to sell the property short and settle for less than what is owed on the mortgage.
How can fraud affect this? When properties are sold at an inflated price and are located in your area, this can lead to unwarranted tax increases. The value of your properties is affected when they are sold at inflated prices. These properties are often lost quickly because no one maintains them. If you live next door to an unattractive home, your property value will drop. This pain is something we all feel and this is serious business. Check your credit report to make sure you have not been a victim of identity theft. Mortgage identity theft is a common target for people with high credit scores.