Mortgage Monday: What Is Mortgage Fraud?

What is Mortgage Fraud?

Any one who lies or falsifies information on a loan application commits mortgage fraud. If you do not disclose all of the information that your lender asks for, or if you just adjust the figures a little bit so that you look better, you have committed mortgage fraud. This is often done because the applicant does not know any better. Sometimes it is because the lender, or even worse, the real estate professional, says it is not a big deal.

Creative financing is illegal in today’s real estate transactions. If your lender discovers that any of the information on the loan application is false, you could have your loan called due and payable, pay a fine, go to jail or a combination of all or part of the three. Worse, you could find the FBI knocking on your door.

The FBI defines mortgage fraud as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.”

Lenders can also commit mortgage fraud. Being in business for a long time is no guarantee the your lender is not committing mortgage fraud. A Pennsylvania broker was convicted of defrauding 800 borrowers over a 20-year period using a Ponzi scheme. He somehow managed to keep this fraud going for 20 years. The next 30 years he spent behind bars. A Kansas City, Missouri appraiser was sentenced to 20 years and had to pay a $500,000 fine for his part in a mortgage fraud scheme.

If you suspect mortgage fraud, contact the authorities immediately and report the incident. It could save you a trip to jail and/or a large fine.

Next week: Examples of mortgage fraud.

This entry was posted in First Time Home Buyer, First Time Home Seller, Mortgage Information, Real Estate Information. Bookmark the permalink.

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