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Mortgage fraud is a relatively low-risk behavior that has potential for large payoffs and is accessible to many individuals through out the financial sector. According to the Financial Crimes Enforcement Network accountants, mortgage brokers, and lenders were the most frequent suspects. Those that indulge themselves by taking advantage of others typically are very familiar with the mortgage industry thus knowing how to exploit the system.
Mortgage fraud is defined as the “intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.
Types of Mortgage Fraud
There are two main categories for mortgage fraud. 1) Fraud for property or housing – entails misrepresentations by the applicant for the purpose of purchasing a property for a primary residence. Mortgage applicants may try to exaggerate their income a bit and hide their debt but their intention is to repay the loan. This is the less serious of the two. 2) Fraud for profit on the other hand, involves multiple loans and other schemes enacted to acquire illicit proceeds from property sales.
Victims of Mortgage Fraud
Victims of mortgage fraud involves more than just a few individuals, it can affect entire neighborhoods, borrowers, and mortgage industry entities. When home values are artificially inflated and sold, properties in surrounding areas also become artificially inflated. When property values are inflated property taxes increase putting more pressure on homeowners to come up with additional tax money. Property values can only stay inflated for so long and as the market corrects property values decline making it difficult for legitimate homeowners trying to sell their homes. As the surrounding properties affected by mortgage fraud deteriorate there is an increase in foreclosures, neighborhoods deteriorate and the surrounding area properties depreciate, sometimes very quickly.
When the market is hot, honest buyers and sellers see this as a booming real estate market and want to improve the quality of their lives so they get in, not knowing that it is a bubble artificially created by dishonest individuals eager to give a home loan that you can’t afford on an inflated property value while cashing in on a big commission. The bubble pops and families are left upside down in their mortgages looking for a way out finding very little help. Previous Page
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