In a quick search for “mortgage fraud” in Google News, the
articles on page one were all published between February 14, 2013 and February 21 2013. That’s 10 different cases reported in one week. Interestingly, only 136 cases were opened by the FBI in fiscal year 2004.
Mortgage fraud is a crime in which the intent of the involved parties is to materially misrepresent or omit information on a mortgage loan application or during the course of the mortgage lending process to obtain a loan or to obtain a larger loan that would have been approved had the lender or borrower known the truth. Mortgage fraud involves a person or person’s intent, not their mistakes.
Mortgage fraud comes in many forms – occupancy, income, employment, failure to disclose liabilities, profit, appraisal, identity theft – and is punishable with penalties up to 30 years in prison, fines and restitution.
Valuation fraud is the area in which the utilization of an appraisal management company works to ensure appraiser independence, and most likely the elimination of fraud, in the appraisal process. Valuation Management Group provides an extraordinary appraisal process to ensure appraiser independence and quality appraisals.
The cost of mortgage fraud to lenders, homeowners, and even entire communities is staggering. According to CoreLogic, losses in 2011 from fraudulent residential mortgage originations were $7.4 billion.
Informed borrowers can avoid falling into the fraud trap. The Georgia Real Estate Fraud Prevention & Awareness Coalition (GREFPAC) supplied the following dos and don’ts for consumers to follow when purchasing a home.
- Provide your confidential information only to someone who works with the lender, and someone you trust
- Be honest during the loan application process
- Keep copies of everything you provide to the lender and everything you are required to sign
- Review the Good Faith Estimate of Closing Costs, ask about fees you do not understand, and for a written confirmation of the interest rate lock-in once it is agreed upon
- Read and understand documents before you sign them
- Proceed with caution if you are encouraged to become a real estate investor of multiple properties in a short period of time, especially if you are not required to put money down or if you receive money back from the transaction
- Report anyone who ask or encourages you to
- Use a false identity to obtain a loan
- Provide false information about yourself, professionally or financially
- Provide false information about your intent to occupy the subject property
- Accept payment for use of your own information
- Close a loan that you know has false or misleading information
- Pay your down payment to anyone other than your real estate agent or the seller of the home you are purchasing
- Let anyone sign anything for you without your written approval
- Expect to get “paid” for purchasing a home
- Pay anyone additional fees or costs associated with the loan closing or application process after the loan closes
GREFPAC is a non-profit organization comprised of concerned individuals and real estate industry professionals who promote honesty, openness and fairness in real estate transactions. The organization hosts an annual educational conference in Atlanta, GA. Speakers share their insight on fraud rules, trends, scams, and prevention, among other topics.