Mortgage Fraud on the Rise
If you have tried to get a home loan over the past 12-18 months, you have probably noticed that lenders are putting potential borrowers through a more thorough examination before approving home loans. Even though mortgage loans were way down in 2008 compared to 2007, mortgage fraud increased by 26% during that time, reaching an all time high.
The reason behind the growing fraud in the mortgage market is simple-people are having a hard time getting approved for loans. In some cases it’s because the standards that lenders set to approve borrowers are too high, and in others it’s because there are simply fewer and less flexible mortgage products available today than there were just a few years ago. Another reason why mortgage fraud is up is that the stringent applicant screening has lenders taking a closer look at potential borrowers. The increased scrutiny is exposing more fraudulent claims.
Rhode Island had the highest number of reported fraud cases in 2008, followed by Florida, Illinois, Georgia, and Maryland.
The most common type of mortgage fraud reported was application fraud, as applicants felt that lying on loan applications may increase their chances of securing a loan. Second most common was presenting lenders with fraudulent tax and financial statements, followed by people overestimating the value of a property in order to qualify for more money.
There are basically two types of fraud that are tied to mortgages. Some frauds are carried out to secure cash, with no intention of ever actually possessing a home. Others are designed to help a homebuyer qualify to buy a home that is more expensive than what they would qualify for with their actual credit history and financial situation. Both types of fraud increased substantially in 2008.
With a record number of homes going into foreclosure, homeowners need to be watchful to avoid becoming victims of fraud themselves. Homeowners in financial trouble are susceptible to schemes designed to help them avoid foreclosure. One of the most common frauds in this situation occurs when a homeowner signs the home over to a third party, and then rents it back from that third party. Once you have signed your house away, it can be sold out from under you, so it’s wise to consult with an attorney before entering into an agreement like this.
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Tags: foreclosure, fraud, loan application, mortgage
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