Mortgage Fraud Rips You Off Too

Legitimate mortgage lenders are relying more and more on third-party loan brokers. These brokers look and sound like regular mortgage companies but their sole job is to set everything up and then sell the mortgage to one of the bigger mortgage companies for immediate cash. They never intend to actually collect mortgage loan payments from the consumer at all. They are just a middle man and that has created a ripe opportunity for fraud.

Usually between $2.5 and $3 trillion dollars goes thru mortgage loans each year. With that much money involved, it’s no wonder that thieves are looking for ways to make money out of it. Mortgage fraud matters because it directly affects the housing market and that has a big impact on the nation’s economy.

Mortgage fraud usually involves a "material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase or insure a loan." That’s a fancy way of saying some brokers (and others involved in the mortgage process) “lie, cheat and steal.”

The FBI estimates that 80 percent of all reported fraud losses involve mortgage industry insiders.  Mortgage fraud can involve equity skimming, property flipping, and mortgage related identity theft.

If you are a victim of fraud, we can help. Call us at 1-888-331-6422 or email us today for a Free Fraud Case Review!

Equity skimming is a tried and true method of committing mortgage fraud. Today's common equity skimming schemes involve the use of corporate shell companies, corporate identity theft, and the use or threat of bankruptcy/foreclosure to dupe homeowners and investors.

Property flipping has been around for ages. Here the criminals are usually educated and use identity theft, straw man borrowers and shell companies, along with industry insiders to hide what they are doing. Property flipping occurs when someone purchases property and then inflates its value by using false appraisals.

The artificially valued properties are then repurchased several times, each time for a higher price by crooks in league with the property  "flipper." After three or four sham sales, the properties are eventually foreclosed on by honest lenders. When the lenders lose money, your home mortgage rate can go up. Often flipped properties are ultimately repurchased in foreclosure for as little as 50 percent of what they were worth before all the flipping started.
Thieves make off with the money, the community sees abandoned homes and empty buildings increase, and honest homeowners’ property values go down. Everyone suffers.

Top Ten “Hot Spots” Mortgage Fraud Incidents (per capita)

The FBI reports that 26 different states have significant mortgage fraud problems with Georgia and Florida being the worst, but including California, Nevada, Utah, Colorado, Missouri, Illinois, Michigan and South Carolina in the Top Ten Mortgage Fraud States.

SIGNS OF MORTGAGE FRAUD

• inflated appraisals
• exclusive use of one appraiser
• increased commissions/bonuses - brokers and appraisers
• bonuses paid (outside or at settlement)
• higher than customary fees
• falsified loan applications
• buyers told/explained how to falsify the mortgage application
• requested to sign blank application
• fake supporting loan documentation
• being asked to sign blank loan forms of any kind
• requested to sign other types of blank forms
• purchase loans that are really refinancings
• purchase loans that are disguised as refinances (they often require less documentation)
• promises of a short term investment with guaranteed profit or re-purchase
• promises of a percent of the profit by being a “temporary” owner (used to flip property)
• multiple "holding companies" in the chain of ownership

If you are a victim of fraud, we can help.

Call us at 1-888-331-6422 or email us today for a Free Fraud Case Review!

Common Mortage Fraud Schemes

Property Flipping - First they buy the property. Then they get a fake appraisal at a much higher value. Then they sell it again quickly. The part that is illegal is the faked appraisal. A house worth only $25,000 might be appraised for $100,000 in this kind of scheme. The out of town mortgage company doesn’t realize that it is giving away its money until the loan payments don’t come in and the foreclosure starts and a legitimate appraiser goes out to the house and realizes what has happened and by then it’s too late.

Silent Second - The buyer of a property borrows the down payment from the seller with a second mortgage or “iou” note that no one discloses to the mortgage company. Sometimes the price can be inflated to equal the “iou” and the seller never tries to really even collect the iou because they got the sales price they wanted in the first place. The mortgage company thinks the buyer has invested their own money in the home when, in fact, the buyer doesn’t have a dime down.

Straw Man Buyers - The real identity of the borrower is hidden because a friend or family member acts like they are the one who is buying and borrowing and their credit history is used to get the loan. This same practice frequently occurs in new car sales and may have actually started there.

Stolen Identity - A faked or stolen identity may be used on the loan application. The actual loan applicant may have stolen someone else’s identity information and applied for the loan in their name. You could end up with a home in your name and never even know it. Of course, when the foreclosure happens and a judgment is taken against you, then your credit record can be messed up for years.

Inflated Appraisals - Simply put, a crooked appraiser gives an inflated appraisal to the crooked broker (who usually gives extra money to the appraiser for it) and the broker sets up the loan from there, misleading the frequently out of town mortgage company into thinking that the property is worth far more than it actually is.

Foreclosure Rescue Schemes - The thief finds homeowners who are in default on their home loan or whose house is already in foreclosure. Then they convince the homeowner that they can save their homes if they just sign over the deed to them and pay some “up front” fees. Often the crook then remortgages the property, pockets the fees (and maybe some of the mortgage money) and takes off, leaving the homeowner no better off than they were in the first place.

Equity Skimming - Here the thief often uses a straw man buyer, faked income documents, and faked credit reports, to get a mortgage loan in the straw buyer's name. After the closing, the straw man buyer signs the property over to the investor. The investor rents the property out, pockets the money, does not make any mortgage payments and foreclosure takes place several months later.

Air Loans - A mortgage on thin air. This one shows you just how stupid, or greedy, some mortgage companies can be. Here a broker literally “makes up” everything. They invent the existence of borrowers and properties, establish fake “accounts” for payments, and creates fake escrow accounts too. From the outside, it all looks legitimate, as long as the mortgage company is outside of town and never drives over to look at the non existent house. The crooks even may set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency, etc., for verification purposes. Then when the non existent homeowner refinances their mortgage, and the honest mortgage company calls the crooks to verify the loan, and everything else, they get suckered in big time.

Tips to protect you from Mortgage Fraud

• Use a referral for real estate and mortgage professionals. Also check local government offices to see if the people you are dealing with have the required licenses of industry professional.
• If it sounds too good to be true, it probably is. A promise of huge and easy profits in a short period of time should be a warning to you.
• Watch out for strangers who offer to help you with refinancing or saving your home, or who use high-pressure sales techniques.
• Look at recent comparable sales in the area to learn the true values, and also public tax assessments can verify the value of local homes.
• Be extra careful with legal paperwork. Understand what you are signing and agreeing to – If you don’t understand it then read it again. If you still don’t understand it, don’t take a chance on getting burned – talk to an attorney.
• Look at the title history to see if the property has been quickly sold several times – a signal that the property has been "flipped" and the value falsely inflated.
• Know the terms of your mortgage. Make sure the loan documents are accurate and complete.
• Never sign any loan documents that contain blanks. It’s easy to rip off someone who signs blank documents.
• Be careful of e-mails or internet ads that promise to wipe out your mortgage loan or give you easy credit or set up credit cards for you, but also ask you to sign up or pay an up-front fee. These kind of documents are often called Declaration of Voidance, Bond for Discharge of Debt, Bill of Exchange, Due Bill, Redemption Certificate, or other similar language. Warning: these documents are often faked and nothing but empty promises that will rip you off.
• Remember: there is no magic cure to get rid of legitimate bills that you really owe.
• Compare mortgage loan costs and be leery of lenders who tell you that they are your only chance of getting a loan or owning your own home.
• Watch out for "No Money Down" loans. This is often just a gimmick intended to get you to buy something that you may not be able to afford in the first place. Also watch out for any loan officer or employee who alters your credit application in order to get you qualified for a loan. It can be against the law and land you in jail or bankruptcy court.
• Don’t let anyone convince you to borrow more money than you can afford to repay.
• Remember what your mother said: If it sounds too good to be true – it probably is!

If you are a victim of fraud, we can help. Call us at 1-888-331-6422 or email us today for a Free Fraud Case Review!

For more information about Ohio Consumer Law and mortgage fraud visit our Ohio Consumer Law site.