Home Equity Loans
-What Are Rate-Locks
-Cost of Owning a Home
-Homeowner Tax Breaks
Fixed vs. ARMs
-Remodeling Your Home
-Mortgages in 2007!
Much Can I Afford?
Selling Your Home
There a variety of ways mortgage fraud can occur.
Fraud to Qualify
Homebuyers often find themselves in trouble as a result of a new law
called 'fraud for house' or 'fraud to qualify'. In these instances,
the borrower usually provides false information, i.e. income
amounts, source of down payment, employment history or intentions of
Another type of fraud is called a 'silent second'. This is when the
seller lends the buyer money that will be used as a down payment on
the property. The financing is achieved via an unrecorded second
mortgage. When this occurs, lenders assumes that the borrower is
merely investing their own money. This type of scheming is common
even though the lender is the one taking the risk. The critical
issue is that this type of lending misrepresents the financing
picture of the real borrower.
No matter what type of fraud or scheme is going on, the primary goal
is the same: to help a borrower achieve financing for a mortgage
that they would not normally qualify for. In the instance of silent
second scamming, the borrower wants the property and does has full
intentions of repaying their loan.
Fraud for Profit
Another type of scheme that occurs is called 'fraud for profit'.
This is a much more advanced type of mortgage fraud that includes
the involvement of industry insiders, i.e. real estate agents,
appraisers, lenders and/or closing attorneys.
Even though there is a countless amount of variations on fraud for
profit, featured below are the most common:
Flipping - There are two types of house flipping. One
is legitimate, and one is not. The legitimate occurs when homes are
purchased, improvements are made and the houses are resold with the
seller making quick profits. This is commonly known as 'quick
turns'. However, it is very common for sellers to lie about
improvements that were made to homes that they are 'flipping'. When
this occurs, the seller will obtain a fake appraisal and a grossly
inflated sales price.
Straw buyers - Another type of
commonly used scheme is when 'straw buyers' are utilized to keep the
identity of the real borrower hidden. 'Straw buyers' have good
credit and unknowingly help those that would not normally be able to
qualify for a mortgage. They are tricked into thinking that they are
investing in real estate that is going to be rented out. They are
told that the rent is to be used as payments for the mortgage.
However, no payments are made and the lender eventually forecloses
on the property. It is also common for the straw buyer to be in one
the scam, and are making a profit from the earnings.
Appraisal fraud - Most mortgage
schemes involve appraisal fraud. The value of a property will be
inflated by a deceitful appraiser. Once the seller receives their
check at the closing for the phony amount, they pay off the
appraised and everyone else involved. Typically, the borrower fails
to make any payments and the house eventually goes into foreclosure.
Foreclosure scams - This type of
fraud is especially malevolent because it involves the preying on
individuals with large enough financial issues that they are in
danger of losing their homes. A homeowner in the beginning stages of
foreclosure will be contacted by a scammer claiming that they can
assist the homeowner in getting rid of their debt; helping them save
their house. An upfront fee is required, which the scammer takes and
then vanishes. Another variation of this scheme occurs when a
homeowner is approached by a fraudster who offers to assist the
homeowner refinance their mortgage. The homeowner signs all of the
involved documents only to discover that in actuality they just sold
their home the scammer and are evicted.
**Homeowners need to be careful when
refinancing with bad credit. There are many lender out there
that prey on those in desperate times.