What Is Mortgage Fraud?
Mortgage fraud is a federal offense that occurs when a homebuyer, seller, or lender lies about or omits important information in relation to a mortgage loan. Under federal law, a person who commits mortgage fraud can face up to 30 years of imprisonment, and perpetrators may face civil litigation if another party incurs significant damages. There are two categories that mortgage fraud falls into:
- Fraud for profit. This type of mortgage fraud is committed by real estate professionals (appraisers, agents, brokers, and other industry insiders) with the intent to take money from a property or transaction. Offenders often collude with other industry professionals and misuse the lending process to take advantage of lenders or homeowners during the lending process.
- Fraud for housing. This category of mortgage fraud occurs when a borrower submits inaccurate or incomplete information in order to qualify for a loan or obtain better terms. For example, a borrower may misrepresent their income on a loan application.
Common Types of Mortgage Fraud
Some of the common types of fraudulent mortgage schemes include:
- Appraisal schemes. Sometimes industry professionals, like a loan officer or broker, collude with the property appraiser to have the appraisal value inflated. They do this so that the home’s value matches the buyer’s offer and the deal can be completed.
- Equity skimming. To obtain a mortgage, an investor may use a fake buyer, credit reports, and false income reports; they then have the fake buyer (sometimes called a straw buyer) sign over the property to them after closing. In many cases, they also make no payments on the property but rent it until it is foreclosed.
- Fake support documents. Loan applicants may submit altered paycheck stubs, forged documents, or other fraudulent documentation to better their chances of obtaining a loan.
- Property flipping. A person may purchase a home and collude with an appraise to have the value falsely inflated so that they can resell the property without having actually increased its value.
- Silent second. If a buyer takes out a second loan to cover the down payment for an initial loan, they have committed fraud if the initial lender does not have knowledge of the second loan.
- Stolen identity. If a loan applicant uses a stolen or fake identity on the loan application, they have committed fraud in an attempt to obtain a better loan or offer.
- Straw buyers. This fraudulent act occurs when a borrower’s identity is hidden via the use of another person’s (real or fake) credit history, name, or contact information.
If you or a loved one have been arrested for or are under investigation for mortgage fraud, the attorneys at Brickfield & Donahue are equipped to help you. Learn more about our services by calling (201) 574-7919 or reaching out to our team online.