Data from the last quarter of 2020 reveal one in 164 mortgage applications was fraudulent. Mortgage fraud is the attempt to secure a mortgage or benefit from it using deceit and omissions. A consumer in Dallas and Fort Worth, Texas, should be aware of the common mortgage schemes.
Mortgage fraud committed by borrowers
Mortgage fraud for property covers several types of white-collar crimes committed by borrowers for better loan rates. Occupancy fraud involves the borrower lying about living in the home as a primary residence, which gets a better rate. It can also be done in reverse where the borrower buys the property and uses the rental income to qualify for the mortgage.
A straw buyer is a scam that allows the borrower to buy a home using someone else’s good credit. A common sign of a straw buyer is the loan goes into early default, commonly 90 days after the loan date. House flipping is legal, but it may be fraud if the house is bought below market value and resold quickly for profit.
Mortgage fraud committed by lenders
Housing fraud for profit is commonly committed by lending officers, industry insiders, or appraisers to make a profit for themselves. One type of housing for-profit scam is an air loan, which means the scammer creates a fake buyer with a nonexistent address. They will also go so far as to secure the needed documents and invent a phone number and bank account.
A foreclosure scam preys on homeowners facing foreclosure and promises to rescue them, but there’s a catch. They must give them the title, and the scammer may let the owner rent the home for one year. The scammers allege they will make the payments for the borrower, but they never do, causing a foreclosure risk.
Mortgage fraud comes with stiff penalties, including jail time and fines. However, a good defense may get the charges reduced.