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Is it possible that I’m committing mortgage fraud by accident?

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Is it possible that I’m committing mortgage fraud by accident?

You’d never consider mortgage fraud.

Mortgage fraud exists. It’s also possible for otherwise-harmless people to become involved.

We all know when a crime is just a crime. Bank robberies and auto thefts are definitely crimes. Mortgage fraud is more subtle. Real estate finance is difficult to grasp. Professionals and authoritative figures aren’t always reliable. The FBI defines mortgage fraud as “a substantial deception, misrepresentation, or omission in respect to a mortgage loan that is subsequently relied upon by a lender.” As defined by the Federal Reserve, mortgage fraud involves “false statements that affect a bank’s decision to grant or deny a loan.”

Is mortgage fraud a common occurrence?

Mortgage fraud that isn’t intentional may appear impossible, but financial criminals are crafty. They don’t come out and say they’re doing something wrong. Rather, they work hard to perplex and compromise both lenders and borrowers. In the second quarter of 2018, CoreLogic estimates that one out of every 109 mortgage applications had signs of fraud. Fraud is a significant issue, given the millions of applications submitted each year.

Mortgage fraud can take many different forms. The ultimate victim is usually a lender, but buyers and sellers can also be harmed along the way. According to the FBI, the following are the most common types of mortgage fraud.

Schemes to Save Homes from Foreclosure

Homeowners facing foreclosure may become victims of mortgage fraud. So-called “rescuers” have been known to dupe desperate homeowners into committing illegal acts. For example, entrusting deeds to con artists. Alternatively, you could sell to a straw buyer. Using phony appraisals to inflate the sale price.

Schemes for a loan modification

Scammers often call homeowners who are facing foreclosure and offer to help them negotiate their loan terms. In the words of the FBI, “scammers sometimes ask for big payments up front and negotiate bad terms for customers, or they don’t negotiate at all.” Most of the time, the homeowners lose in the end. Scammers may call homeowners who are facing foreclosure and offer to change their loan terms on their behalf. “The scammers ask for big payments upfront and usually negotiate terms that are bad for customers, or they don’t negotiate at all,” the FBI said. Most of the time, the owners lose their homes.

Conversion plans for condos

In a condo conversion scheme, people with good credit buy rental units at prices that are higher than they should be. Under-the-table incentives are given to buyers by the sellers. On loan applications, buyers’ incomes are often inflated, and sometimes they don’t even know it.

The lender ends up giving money to a deal that is much riskier than it would have been otherwise, and the loans fail after the bad guys have taken as much rent as they can without paying the mortgage.

Skimming or stripping of equity

Many people who owned their homes lost their jobs and fell behind on their mortgage payments as a result of the Great Recession. According to the rumor, investors would keep the property for a year, which would allow them to pay their rent and continue living in their homes.

The owners were notified that they would have the opportunity to repurchase their property after a period of one year. Investors took advantage of the opportunity to refinance the property in order to extract as much cash as they could before the property went into foreclosure. The previous owners are forced out of the property after foreclosure by the bank.

Seconds of silence

In this case, the lender is unaware that the buyer is taking out a second loan. This second loan could be used to make a down payment on a home. Purchase-money second mortgages (also known as piggy-backs) are not prohibited. It’s the failure to disclose them that’s the problem.

Fraudulent reverse mortgages

According to the FBI, reverse mortgage con artists “recruit seniors through local churches, investment seminars, and television, radio, billboard, and mailer advertisements.” Scammers obtain a reverse mortgage on behalf of the property owner, but keep a portion or all of the proceeds for themselves. Fraudulent appraisals are frequently used in such schemes.

Loans for commercial properties

Fake rent rolls, fraudulent appraisals, and fake leases are all methods used by commercial property owners to finance and refinance their properties. The lender makes a risky, oversized loan.

Loans granted via the air

According to the FBI, the victim lender funds a “nonexistent property loan with no collateral.” For air loans, brokers create borrowers and properties, establish payment accounts, and hold escrow accounts in their custody.

“They may set up an office with a bank of telephones, each of which is used to impersonate a false employer, appraiser, credit agency, or other business in order to mislead creditors who attempt to check the loan application information.”

Be wary of deceptive wire transfer schemes.

Emerging as a new sort of financial crime is wire transfer fraud. The incidence of business email compromise (BEC) fraud is growing. A buyer receives an email containing instructions to wire closing funds to a certain account. What is the key? A substitute account number was supplied in the wire transfer.

How to Protect Yourself

A variety of safeguards can be taken to defend against mortgage fraud.

When filling out a mortgage application, avoid guessing. Tax returns and bank statements can supply you with income and savings information.

Second, maintain a record of everything. Keep copies of all documents and statements used to complete a mortgage application. Create a duplicate of the application and save it safely. If information needs to be double-checked, you will have supporting documentation readily on hand.

Finally, become familiar with your closing agent. Never transmit funds to a closing agent without first verifying their account information. To reconfirm account numbers, contact the closing agent. Request that the closing agent send an email including accurate wiring instructions to multiple email addresses.

Incomplete loan applications should never be signed. You must fill in all of the blanks yourself. Draw a diagonal line across the entirety of the empty forms.

You’d never consider mortgage fraud.

Mortgage fraud exists. It’s also possible for otherwise-harmless people to become involved.

We all know when a crime is just a crime. Bank robberies and auto thefts are definitely crimes. Mortgage fraud is more subtle. Real estate finance is difficult to grasp. Professionals and authoritative figures aren’t always reliable. The FBI defines mortgage fraud as “a substantial deception, misrepresentation, or omission in respect to a mortgage loan that is subsequently relied upon by a lender.” As defined by the Federal Reserve, mortgage fraud involves “false statements that affect a bank’s decision to grant or deny a loan.”

Is mortgage fraud a common occurrence?

Mortgage fraud that isn’t intentional may appear impossible, but financial criminals are crafty. They don’t come out and say they’re doing something wrong. Rather, they work hard to perplex and compromise both lenders and borrowers. In the second quarter of 2018, CoreLogic estimates that one out of every 109 mortgage applications had signs of fraud. Fraud is a significant issue, given the millions of applications submitted each year.

Mortgage fraud can take many different forms. The ultimate victim is usually a lender, but buyers and sellers can also be harmed along the way. According to the FBI, the following are the most common types of mortgage fraud.

Schemes to Save Homes from Foreclosure

Homeowners facing foreclosure may become victims of mortgage fraud. So-called “rescuers” have been known to dupe desperate homeowners into committing illegal acts. For example, entrusting deeds to con artists. Alternatively, you could sell to a straw buyer. Using phony appraisals to inflate the sale price.

Schemes for a loan modification

Scammers often call homeowners who are facing foreclosure and offer to help them negotiate their loan terms. In the words of the FBI, “scammers sometimes ask for big payments up front and negotiate bad terms for customers, or they don’t negotiate at all.” Most of the time, the homeowners lose in the end. Scammers may call homeowners who are facing foreclosure and offer to change their loan terms on their behalf. “The scammers ask for big payments upfront and usually negotiate terms that are bad for customers, or they don’t negotiate at all,” the FBI said. Most of the time, the owners lose their homes.

Conversion plans for condos

In a condo conversion scheme, people with good credit buy rental units at prices that are higher than they should be. Under-the-table incentives are given to buyers by the sellers. On loan applications, buyers’ incomes are often inflated, and sometimes they don’t even know it.

The lender ends up giving money to a deal that is much riskier than it would have been otherwise, and the loans fail after the bad guys have taken as much rent as they can without paying the mortgage.

Skimming or stripping of equity

Many people who owned their homes lost their jobs and fell behind on their mortgage payments as a result of the Great Recession. According to the rumor, investors would keep the property for a year, which would allow them to pay their rent and continue living in their homes.

The owners were notified that they would have the opportunity to repurchase their property after a period of one year. Investors took advantage of the opportunity to refinance the property in order to extract as much cash as they could before the property went into foreclosure. The previous owners are forced out of the property after foreclosure by the bank.

Seconds of silence

In this case, the lender is unaware that the buyer is taking out a second loan. This second loan could be used to make a down payment on a home. Purchase-money second mortgages (also known as piggy-backs) are not prohibited. It’s the failure to disclose them that’s the problem.

Fraudulent reverse mortgages

According to the FBI, reverse mortgage con artists “recruit seniors through local churches, investment seminars, and television, radio, billboard, and mailer advertisements.” Scammers obtain a reverse mortgage on behalf of the property owner, but keep a portion or all of the proceeds for themselves. Fraudulent appraisals are frequently used in such schemes.

Loans for commercial properties

Fake rent rolls, fraudulent appraisals, and fake leases are all methods used by commercial property owners to finance and refinance their properties. The lender makes a risky, oversized loan.

Loans granted via the air

According to the FBI, the victim lender funds a “nonexistent property loan with no collateral.” For air loans, brokers create borrowers and properties, establish payment accounts, and hold escrow accounts in their custody.

“They may set up an office with a bank of telephones, each of which is used to impersonate a false employer, appraiser, credit agency, or other business in order to mislead creditors who attempt to check the loan application information.”

Be wary of deceptive wire transfer schemes.

Emerging as a new sort of financial crime is wire transfer fraud. The incidence of business email compromise (BEC) fraud is growing. A buyer receives an email containing instructions to wire closing funds to a certain account. What is the key? A substitute account number was supplied in the wire transfer.

How to Protect Yourself

A variety of safeguards can be taken to defend against mortgage fraud.

When filling out a mortgage application, avoid guessing. Tax returns and bank statements can supply you with income and savings information.

Second, maintain a record of everything. Keep copies of all documents and statements used to complete a mortgage application. Create a duplicate of the application and save it safely. If information needs to be double-checked, you will have supporting documentation readily on hand.

Finally, become familiar with your closing agent. Never transmit funds to a closing agent without first verifying their account information. To reconfirm account numbers, contact the closing agent. Request that the closing agent send an email including accurate wiring instructions to multiple email addresses.

Incomplete loan applications should never be signed. You must fill in all of the blanks yourself. Draw a diagonal line across the entirety of the empty forms.