What Constitutes Mortgage Fraud?
February 13, 2012
by Rise' Johns
Because of all the foreclosures throughout the U.S. lenders are taking a harder stance on mortgage fraud. If they wind up foreclosing on a property and, after reviewing the files, suspect mortgage fraud, they will prosecute. The penalties can be huge fines or jail time.
Here are some facts to consider, according to Howell Haunson (partner in charge of education at Morris/Hardwick/Schneider):
#1 Mortgage fraud is not going away any time soon. The FBI has been working with bureaus of investigation in states that recently passed residential mortgage fraud acts to stay abreast of the latest fraud tactics.
The FBI has found that fraudsters are evolving new ways to take advantage of others and hide their intent. For this reason, anyone involved in the mortgage industry needs to be educated on the red flags of possible mortgage fraud.
#2 Multiple contracts & HUD-1 Settlement Statements: In this scheme, unbeknownst to the seller, the contract and settlement statement that is sent to the lender shows an inflated sales price. This enables the buyer to obtain a higher mortgage. In the
end, the seller believes the property was sold for $300,000, but lender, agent and buyer believe the sales price was $500,000 (the amount on which the agent’s commission is calculated.)
#3 Bogus Liens or Invoices: A buyer contracts with a seller at an inflated price. At closing, the difference between the true sales price and the inflated contract price is paid to a bogus shell company of the buyer or individuals affiliated with the buyer.
#4 Straw Borrowers: This type of fraud intentionally disguises the true beneficiary of the loan proceeds. It may be used to:
· Conceal questionable transactions.
· Replace a legitimate borrower who may not qualify for the mortgage or intend to occupy the property.
· Circumvent applicable lending limit regulations by applying for and receiving credit on behalf of a third party who may not qualify or want to be contractually obligated for the debt. The straw borrower may be a friend or relative of the true beneficiary, or merely a paid participant.
These are just the more common types of mortgage fraud. If you, as a buyer or seller of a property, suspect mortgage fraud, RUN AWAY. The penalties are severe.