The US Department of Justice estimates that between 2005 and 2015, $1 trillion was lost due to mortgage fraud. This includes everything from false documents used to obtain mortgages to outright theft of funds. The FBI reports that mortgage fraud cases have increased by 50% since 2010. The FBI says that in 2014 alone, they investigated over 1,000 cases of mortgage fraud.
Various parties can commit mortgage fraud, including real estate agents, loan officers, appraisers, title companies, attorneys, bankers, and even government officials. It’s also possible for one person to commit multiple acts of mortgage fraud. For example, an individual may use fraudulent documents to get a home loan and then sell the property without paying off the loan.
Examples of housing fraud committed by borrowers, often with assistance from loan officers or other personnel, consist of creating false statements about employment and income, debts and credit, or property value and condition. An industry professional committing fraud for profit by making false representations or omitting relevant information about their own or their clients' employment and income, debt or credit, or property value and condition.
A mortgage fraudster will typically make false statements about their client's employment history, current financial status, or past financial situation. They may lie about their income, assets, liabilities, or a combination thereof. They may exaggerate or falsify income and asset information or omit or conceal information about their own or clients' finances.
They may also make false statements about the borrower's ability to repay the loan. If a mortgage fraudster makes false statements about the borrower’s employment history, they could be charged with perjury.
Mortgage fraud is often a result of greed, dishonesty, and poor business practices. It can happen at any stage of the loan process, from origination to closing. The most common types include:
There are many different types of real estate fraud, including:
Mortgage fraud has become a significant problem in recent years, with some estimates placing it at $1 trillion annually. The most common types of fraud include loan modification scams, which involve lenders offering to modify mortgages so homeowners can avoid foreclosure; fraudulent appraisals, where appraisers inflate property values to obtain higher loans; and identity theft, where people steal someone else's personal information to apply for loans under their name.
Mortgage fraud is often associated with subprime loans, but it doesn’t have to be. The most common type of mortgage fraud involves appraisals. In this case, lenders rely on appraisers who provide fraudulent estimates of the property’s value. This allows them to approve mortgages they wouldn’t otherwise be able to give out.
Appraisal fraud happens when appraisers inflate the value of a home to get a high appraisal score. They do this by using erroneous data, such as inaccurate sales prices and making up numbers. Lenders then use these inflated values to determine whether or not to grant a loan.
Appraisal fraud is usually committed by real estate agents, who may be paid extra for each transaction they close. Other times, appraisers may be pressured into inflating the value of properties because they need to meet a quota.
The following are some of the most common appraisal fraud scams:
The financial industry has been plagued by fraud since the beginning of banking. It was the first industry to adopt modern accounting methods. It was also one of the first industries to have a central bank, which helped protect against fraud.
Today, the financial industry continues to struggle with fraud. Banks and other financial institutions face numerous challenges, such as:
The best way to prevent fraud is to educate yourself about it. If you suspect someone has committed fraud against you or that you are being targeted for mortgage fraud or financial industry fraud, contact The Whistleblower Advocates at (833) 310-3147 for a FREE, confidential consultation.
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