Mortgage fraud has been making headlines in the past few years, with some suggesting it played a key role in the financial crisis of 2008.
Truth is: If there’s money to be made dishonestly through mortgages, there’s no shortage of criminals to figure out ways of doing so. And some of those criminals are us.
While there are many ways to commit mortgage fraud, one of the most common is to sign a mortgage on behalf of someone else, often for the promise of a quick payback. Never sign a real estate loan application unless you yourself are purchasing the property; you could be on the hook for a whopping sum of money.
Don’t get tempted. Ensure that you deal only with licensed real estate professionals and consult a lawyer for help with such things as land title searches and title insurance.
You don’t have to look far for the culprits in “Liar Loans” – a widespread type of mortgage fraud. This occurs when an applicant exaggerates income or years on the job to get a larger loan than he or she would otherwise qualify for.
If it’s discovered that an applicant misrepresented information when buying or refinancing a home, not only can the lender demand immediate repayment of the loan in full, but the applicant may have to do some explaining to the police.
Lenders, too, can be guilty of mortgage fraud. Employees of a New York City bank falsified documents so unqualified borrowers could receive mortgages. The loans were sold to an unwary Fannie Mae, which secures mortgages by repackaging them as securities for investors and lost when the unqualified buyers defaulted.
As in so much of life, ensuring that you’re not unwittingly part of a mortgage fraud involves common sense. Trust your instincts. If it seems too good to be true, it probably is.