What is Mortgage Fraud?
Although there is no specific statute that defines mortgage fraud, each mortgage fraud scheme contains some type of material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. The FBI delineates mortgage fraud in two distinct areas: 1) Fraud for Profit; and 2) Fraud for Housing. Fraud for Profit uses a scheme to remove equity, falsely inflate the value of the property or issue loans relating to fictitious property(ies). Many of the Fraud for Profit schemes rely on “industry insiders”, who override lender controls. The FBI defines industry insiders as appraisers, accountants, attorneys, real estate brokers, mortgage underwriters and processors, settlement/title company employees, mortgage brokers, loan originators, and other mortgage professionals engaged in the mortgage industry. Fraud for Housing represents illegal actions perpetrated by a borrower, typically with the assistance of real estate professionals. The simp
Mortgage fraud occurs when a consumer or mortgage industry professional provides or intentionally uses incorrect information that is relied upon by an underwriter or lender to cause them to fund, purchase or insure a mortgage loan which they otherwise would not have approved. The intentional omission of certain information, such as the borrower’s self employment status or true source of funds used for the down payment, earnest money deposit and/or closing costs, can also be considered an act of mortgage fraud. Mortgage fraud may occur with or without the knowledge or active participation of the borrower.
Mortgage fraud is committed if a person intentionally or knowingly makes a materially false or misleading written statement to obtain a mortgage loan. Examples of criminal mortgage fraud includes, but is not limited to, illegally inflating property appraisals; concealing a second mortgage from a primary lender; and concealing or stealing a borrower’s identity.
Mortgage fraud is a type of fraud in which the details of a mortgage application are manipulated for the purpose of benefiting the buyer, the seller, or a third party, typically at a cost to the lending institution. It is punished very severely in some regions of the world, although lack of investigative ability on the part of government agencies has made mortgage fraud appealingly low-risk in the eyes of criminals. Mortgage fraud is not the same thing as predatory lending, a practice in which a lender deliberately misleads or confuses borrowers. There are two types of mortgage fraud: fraud for property, and fraud for profit. In fraud for property, the buyer is usually responsible for the mortgage fraud, making omissions in the mortgage application which ensure that the application will be approved. For example, someone might lie about his or her income, financial obligations, employment status, or position at a company in order to secure a loan. In these cases, people commit mortgage
