- Personal Finance
Beware of Mortgage Fraud
Mortgages are long term contracts between borrowers and lenders and involve fairly large amounts when properties are involved. Because of this, many borrowers try to find ways and means to reduce the burden on them for making the repayment. Some of these tend to become activities that can be considered criminal and will constitute mortgage fraud.
The Beginning of Morgage Fraud
Most mortgage fraud, starts out innocuously, with the withholding or misrepresenting of information, which the person taking the loan feels may be detrimental to the loan application. It can also involve other acts that can in some way defraud the lender of his or rightful dues. This sort of mortgage fraud has reached large proportions and even led to a number of states enacting penalties for such crimes. Courts consider mortgage fraud the same as a bank fraud, mail fraud or money laundering and can sentence the persons committing this fraud for sentences that can be as much as thirty years.
What Constitutes Fraud
There are times when a buyer takes some cash or like amount, and does not disclose this fact to the lender. This is like reducing the value of a signed contract which indicates the value of the property and thus becomes fraudulent. There are times when borrowers are unable to make the required down payment, which is a must in all property deals. They, then commit fraud when they borrow this payment from the seller and create a second mortgage that is really not enforceable. Some people try to represent such borrowings as gifts that are to be repaid, but the very fact that it is called a gift, makes it a criminal activity if such a gift has to be returned. A number of people who are desirous of taking out mortgages also misrepresent their income so that they get better terms for the loaned amount. This is considered mortgage fraud. Fraud can also be established if a false contract with higher sales amounts is sent to the lender, so that the appraisal for the property is increased. Making a statement that a deposit has been made outside the contract, when it has actually not been done is also a mortgage fraud. Loan applications ask for a fair amount of information and many people skirt issues or misrepresent facts, if they feel these will in any way hurt their case. These are also considered as mortgage frauds. A false identity is used on some loan applications and this is a definitely case of mortgage fraud.
Other Fraudulent Activities
There are times when investors use false documents to get a loan in the name of a nominee. This nominee then signs over the property to the investor, who rents out the property and does not make any payments against the mortgage. The investor, meanwhile, rents out the property and continues to do so, until the lender forecloses the property. Some people even take out loans against property that does not exist. Brokers arrange for facilities that are used for verification. These facilities are closed after the loan is obtained. There are a number of ways that are used by unscrupulous people to commit mortgage fraud, and the legal authorities are hard pressed to keep abreast of such schemes, as newer ways are constantly being evolved.