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Mortgage Fraud

Buying a home and taking out a mortgage should be one of the more exciting times in a person’s life. But this is certainly not the case if the person buying the home was a victim of mortgage fraud.

Cases of mortgage fraud have risen steeply within the past couple of years and more and more innocent people are having their good name and credit absolutely ruined.

An article by Andrea Coombes from The Wall Street Journal looks into the various types of mortgage fraud out there and how to protect yourself from becoming a victim.

There are many different types of mortgage fraud out there, and it is extremely important to be aware at all times.

“ Once a nuisance to a handful of lenders, mortgage fraud has blossomed into one of the fastest-growing white-collar crimes in the country, putting innocent homeowners on the hook for overpriced houses and pushing up interest rates for all home loans. In some cases, scammers buy dilapidated houses; get fake appraisals to inflate the value and sell the homes for far more than they're worth, industry experts say.”

Another way that fraudsters are scamming people is by getting inexperienced real estate investors to essentially “sell” their name and credit score and promise to arrange a loan and find a property and tenants. Then they will sell the property for huge profits. But this is not what happens at all. Instead, the scammers use the investors name on the loan documents and walk away with all of the loan proceeds.

Other times, identity thieves steal a person’s identity and purchase property in their name. Many cases of fraud involve someone in the industry.

“But these schemes, which the Federal Bureau of Investigation calls ‘fraud for profit’ and which account for about 80% of mortgage-fraud cases, usually require the work of an industry insider. The other 20% of mortgage fraud is ‘fraud for property,’ in which borrowers lie about their income or assets to buy a home, but intend to pay.”

The mortgage industry has lost millions of dollars because of these scams, and consumers are paying for it in the higher rates. Lenders cover the losses from these scams by charging higher rates overall.

Being a victim of fraud can ruin your credit history for the rest of your life.

“For borrowers who become unwitting victims, the effects can be devastating, including losing a home through foreclosure once it's revealed the house is worth far less than the mortgage loan. This usually happens when the borrower goes to refinance or sell and a true appraisal is done.”

There are many ways to protect yourself from mortgage fraud, and one of the easiest ways is to become an educated borrower. Knowing the home buying and mortgage processes will help you to know if something does not seem right.

“How can you protect yourself if you're buying a house? Ask to see the appraisal to ensure accuracy. For instance, check the square footage and house description. Also, be wary of real estate "experts" who tell you it's OK to fudge the numbers, or those who promise your investment in a particular property will yield huge profits. An FBI page ( www.fbi.gov/page2/ dec05/mortgagefraud121405.htm) has more information.”

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