Fraud happens everywhere. Many homebuyers fall prey to mortgage fraud schemes by sophisticated operations looking to gain some extra cash at the expense of everyday consumers. You can avoid becoming a victim! Read on for tips on how to protect yourself from mortgage fraud and predatory lending schemes.
What is mortgage fraud?
The FBI defines mortgage fraud (also known as mortgage scams) as any scheme containing “a material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan.” So what exactly does that mean? Essentially, you are committing fraud if you lie or omit essential details on your mortgage application to get more favorable terms on your mortgage loan.
Types of mortgage fraud
There are two mortgage fraud categories: property/housing and profit. Fraud for property occurs when an applicant misrepresents or omits information to obtain more favorable terms on their home loan. This scheme usually involves a single loan. Although applicants may embellish income and conceal debt, they intend to repay the loan.
Fraud for profit often involves multiple loans and elaborate schemes perpetrated to gain illicit proceeds from property sales. Gross misrepresentations concerning appraisals and loan documents are widespread in these schemes. Scammers may also pay consumers for their participation. This second category is of most concern to law enforcement and the mortgage industry.
Tips on preventing mortgage fraud
The majority of mortgage lenders want to put people into a home they can afford. But some bad actors might wish to take advantage of you for financial gain. Don’t let scammers pressure you into buying more home than you can afford. There are several things you can do to protect yourself from becoming a victim of mortgage fraud:
- Be honest on your application
- Make sure you get referrals for mortgage professionals from trusted friends and family.
- Find out what other homes in the area have sold for compared to the property you are looking at and review tax assessments to verify the property’s actual value.
- Make sure you understand everything you’re signing. If there’s something you don’t understand, be sure to consult an attorney.
- Be wary of any documents that contain blanks, as this can leave you vulnerable to fraud.
- Review all the loan documents to ensure all the information – including your name – is accurate and true.
- Check the title history to determine how often the property has been sold and resold. It could indicate a falsely inflated property value or an illegally flipped property.
Protecting yourself from Predatory Lending Schemes
Predatory lending schemes are prevalent in our modern society. It’s easy for these schemers to set up sophisticated operations that look like legitimate mortgage lenders or financial institutions.
One rule of thumb is “if it looks too good to be true, it probably is.” Some other tips for avoiding these predatory lending schemes:
- Watch out for mortgage professionals who falsely alter information to qualify the consumer for the loan.
- Do not let anyone convince you to borrow more money than you can afford to repay.
- Do not let anyone persuade you into making a false statement, such as overstating your income, the source of your down payment, or the nature and length of your employment.
Finding an honest mortgage lender will help you avoid getting involved in a mortgage fraud scheme. At KFS Mortgage Co., we are dedicated to providing our clients with the most up-to-date and trustworthy loan information. Our dependable mortgage loan experts have the experience and care to safely guide you through the process.
For more information, contact KFS Mortgage Company today. KFS Mortgage Co. Experience, Trust, and Peace of Mind.