Definition of Mortgage Fraud

The intention of mortgage fraud is generally to receive a loan amount greater than that which would have been authorized if the request had been made honestly. For example, by intentionally falsifying information on a mortgage application. Mortgage fraud schemes include buying straw, airline loansand double sales.

In addition to individuals committing mortgage fraud, large-scale mortgage fraud schemes are not uncommon. In 2008, the US Department of Justice and the Federal Bureau of Investigation (FBI) launched “Operation Malicious Mortgage” as a special operation to investigate and prosecute 144 mortgage fraud cases. Penalties for mortgage fraud include fines, restitution and jail time with sentences averaging 28 months. There are two distinct areas of mortgage fraud.

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Fraud for profit

The perpetrators of this type of fraud are often industry insiders using their specialized knowledge or authority. These insiders include bank officers, appraisers, mortgage brokers, lawyers, loan originators and other professionals engaged in the mortgage industry. Fraud for profit is not about obtaining housing, but rather about abusing the mortgage process to steal money and equity from lenders or landlords. The FBI prioritizes fraud for profit cases.

Housing Fraud

This type of fraud is usually represented by illegal actions taken by a borrower motivated to acquire or retain ownership of a home. For example, the borrower may misrepresent income and asset information in a loan application or trick an appraiser into manipulating a property’s appraised value.

Eliminate Mortgage Fraud

Mortgage fraud is a financial crime that involves falsifying loan documents or trying to illegally profit from the mortgage process. The FBI considers fraud to be a material misstatement, misrepresentation, or omission in connection with a mortgage that a lender then relies on. A lie that influences a bank’s decision—for example, whether to approve a loan, accept a reduced repayment amount, or agree to certain repayment terms—is mortgage fraud. The FBI and other agencies tasked with investigating mortgage fraud, particularly in the wake of the housing market crash of 2008, have expanded the definition to include fraud targeting distressed homeowners.

In addition to lying on a loan application, other types of mortgage fraud include:

  • straw buyers are loan seekers used by fraudsters to obtain mortgages and are used to disguise the real buyer or the true nature of the transaction.
  • An air loan is a loan to a straw or non-existent buyer on non-existent property.
  • A double sale is the sale of a mortgage note to more than one investor.
  • Illegal property flip occurs when property is bought and quickly resold at an artificially inflated price, using a fraudulently inflated valuation.
  • Ponziinvestment clubs or segmentation schemes involve the sale of properties at artificially inflated prices, presented as investment opportunities to naïve real estate investors who are promised incredibly high returns and low risk.
  • A builder bailout occurs when a seller pays large financial inducements to the buyer and facilitates an inflated loan amount by raising the selling price, concealing the inducement, and using fraudulent inflating. Evaluation.
  • A bonded purchase occurs when the homeowner is current on the mortgage, but the value of the home has fallen below the amount owed (submarine), so they ask for a mortgage on the purchase price on another house. Once the new property has been secured, the purchase and surety borrower will allow the first home to move into foreclosure.
  • A foreclosure bailout involves foreclosure “specialists” who promise to help the borrower avoid foreclosure. Borrowers often pay for services they never receive and ultimately lose their homes.
  • In short sale fraud, the perpetrator profits by concealing conditional transactions or falsifying important information, including the actual value of the property, so that the server agent cannot make an informed sale decision. discovered.
  • A non-arm’s length short sale scheme involves a fictitious offer to purchase made by the owner’s accomplice (straw buyer) for the purpose of fraudulently reducing the indebtedness on the property and enabling the borrower to remain in his house.
  • In a short sale scheme, the perpetrator manipulates the short sale lender into approving a short gain and conceals an immediate conditional sale to a pre-arranged end buyer at a significantly higher sale price.
  • In a reverse mortgage fraud, the abuser manipulates a senior into getting a reverse mortgage, then pockets the proceeds from the victim.
  • In affinity fraud, the authors exploit the trust and friendship that exist in groups bound by a common bond. Ethnic, religious, professional or age-related groups are often targeted.
  • Backwards housing fraud, a borrower purchases a home as an investment property and registers the rental proceeds as income to qualify for the mortgage. Then, instead of renting the accommodation, the borrower occupies the premises as their principal residence.

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