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As much as the Federal Bureau of Investigation (FBI) is trying to combat it, mortgage fraud is becoming an increasingly popular way to make a fast--and illegal--buck. It can put you at risk to lose thousands of dollars if you don't know what to watch out for. And though it's not known exactly how rampant this problem is, statistics show it is growing all the time. There are several third parties involved in getting a mortgage which means there is a propensity for individuals involved in the transaction to commit conspiracy. Among others, those parties can include: mortgage brokers, appraisers, attorneys, title company employees, and investors. Some Types of Mortgage Fraud: Inflated appraisals: The appraisal is artificially inflated to make the home seem like it is worth more than it actually is. Foreclosure scams: Homeowners who are at risk of defaulting their loans or whose homes are in foreclosure are led to believe that someone can save their home in exchange for a deed transfer and up-front fees. The perpetrator will re-mortgage the property without actually saving the property from foreclosure. Using false identity: A person's identity and/or credit history is falsely used to apply for a loan. This may be done with the person's knowledge (who's known as a "straw buyer") or it may be a case of identity theft. Equity skimming: An investor uses a straw buyer along with a false credit history and false income information to apply for a loan. After the loan closes, the "straw buyer" then signs the property over to the investor who then rents out the property (without making mortgage payments) until the property is foreclosed. Property flipping: The act of buying a property, fixing it up and selling it at a profit. This is not an illegal act unless the acquisition of the property involved falsifying loan documents such as income information, appraisals, etc. How to Protect Yourself: There are things you can do to protect yourself from becoming a victim of mortgage fraud: - Make sure you get referrals for real estate and mortgage professionals from trusted friends and family.
- Find out what other homes in the area have sold for in comparison to the property you are looking at as well as tax assessments to verify the property's actual value.
- Make sure you understand everything you are signing. Don't sign anything you aren't comfortable with. If there is something you don't understand, be sure to consult an attorney. And be wary of any documents that contain blanks as this can leave you vulnerable to fraud.
- Review all the loan documents to ensure all the information--even including your name--is accurate and true.
- Check the title history to find out how often the property has been sold and re-sold. It could be an indication the property's value has been falsely inflated and the property illegally flipped.
- Don't be pressured into borrowing more than you can afford to repay.
- Don't be talked into inflating numbers or giving false information. Like your mother told you, always tell the truth.
Buying a home is a large investment--for some it's their biggest. So it's important to look out for certain signs to prevent being taken. To find out more about how to avoid mortgage fraud, visit the Mortgage Bankers' Association (MBA) Web site: www.stopmortgagefraud.com. And always go with a real estate agent and a mortgage banker you can trust.
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