Mortgage Fraud Prevention - Protect Your Investment!

Mortgage fraud is not a new crime, but has made recent headlines that make it feel like a new type of crime. The term refers to any action that results in a misrepresentation of the information on your application for your mortgage loan. There are many mortgage fraud laws on the books that are designed to protect consumers and lenders from the sharks sending out these loan applications.

What Is Mortgage Fraud

Mortgage fraud is a crime used by mortgage brokers and loan officers to help land a loan application with their company. The most common way to do this is to lie or intentionally misrepresent the items written on the mortgage application, thus charging the consumer less than they should for the loan, and robbing the lender of their income. Mortgage broker fraud is also designed to add fees to the loan for the mortgage broker. This is because commission mortgage brokers only make money when they land the loan, and the money they make is based on a percentage of the overall loan. It is very tempting for brokers to do this to make some extra money, and unfortunately, many consumers are not educated about mortgage lending fraud. Some forms of fraud are committed by the borrower, and others are committed by the mortgage broker. All are illegal. Here are some specific examples as to how this might happen.

Occupancy Fraud

One type of mortgage loan fraud is occupancy fraud. This is used for investment property mortgages. Instead of applying for an investment property mortgage, the loan is filled out as a primary residence or second home mortgage. This lands lower interest rates for the borrower. It is also illegal.

Employment Fraud

Another type of fraud that is used to try to land lower interest rates is employment fraud. This is a type of mortgage application fraud where the mortgage broker or the borrower does not accurately state their income or employment history. This is done to receive approval for a larger mortgage amount. While this seems to benefit the borrower, not the mortgage lending intermediary, it is still illegal.

Not Disclosing Liabilities

Borrowers are required to disclose all of their other mortgages and other debts when applying for their mortgages. Some mortgage brokers will allow their customers to ignore some of their liabilities, in order to change the debt to income ratio on the mortgage application. A bad credit mortgage broker who claims to be able to get you low rates may be employing this tactic. This is also illegal.

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