Mortgage fraud is serious business. We are talking paying back the loan within 30 days, large fines, and jail time. There are basically two types of mortgage-related fraud: Fraud for profit and fraud for housing. People committing fraud for profit know they are committing a crime and look to make money by deceiving others. Borrowers, intentionally or not, that misrepresent information on the loan application are committing fraud for housing. The latter is still very illegal. Often, others put the idea into a borrower’s head. Actually, it is pretty amazing some of the things borrowers say they are told to say. All of these are considered fraud:
- “Just say it is going to be your primary residence. You will get a better rate and less down payment.”
- “Just tell someone at your employer to say you can relocate (get lots of overtime, guaranteed bonuses, etc).”
- “Tell the lender that the gift donor is your cousin.”
- “Don’t tell them about your child support, alimony, new car loan, etc.”
- “Just tell your landlord to say you didn’t have any late payments.”
Some borrowers think stretching the truth is not a big deal as long as the payments are made on time. There is also a lot of pressure by involved parties to make the sale happen no matter what. I’m here to tell you, that is not the way to go. Realtors, lenders, sellers, and others have something to gain in a closing, but making money on a closing is not worth losing a license or going to prison. It is important for real estate professionals to educate borrowers in the process and the importance of being truthful. Plus, don’t push buyers with quotes mentioned at the start of this article. For instance, if a borrower will not occupy the home, then don’t apply as a primary residence. So much better to be truthful in the beginning even if it means a loan can’t be done. There are worse things in life.
2017 Top 10 Fraud Characteristics Found by Fannie Mae
Fannie Mae, along with all other lending agencies, diligently search for mortgage fraud red flags plus track fraud trends. Both investors and lending agencies heavily research closed loan documents, appraisal, and the occupancy of the home. Here are the 10 most popular fraud activities found by Fannie Mae on closed transactions.
- Occupancy Fraud
- Identity Theft
- Liabilities Fraud
- Credit Fraud
- Employment Fraud
- Appraisal Fraud
- Loss Mitigation Fraud
- Asset Fraud
Some borrowers may complain about lender requests for better documentation for large deposits, illegible pay stubs, address not matching, and more. Yet, lenders must verify these areas for everyone because it is part of required fraud prevention. So, a professional loan officer who cares about his/her license, the lender, and the borrower will ask detailed questions, take an accurate & complete application, and request supporting documentation.
2017 Top 10 States for Mortgage Fraud
One thing about the top-ranked states for fraud is that California and Florida are consistently at the top.
- New York
- New Jersey
Still, think it is worth sneaking something past a lender? Won’t get caught? Not only do lenders complete post-closing file audits, but so do investors, lending agencies, and other agencies. All of these will check the documentation, occupancy of the property, and verify the application is accurate. So, if it means a little more rate, down payment, or even a loan denial, make sure to be up-front and honest in the mortgage process.
Luckily, there are so many wonderful mortgage loan products. Why try to lie in the mortgage process? Wondering if you qualify? Learn about some great mortgage solutions below: