Mortgage fraud is a type of fraud committed by borrowers and professionals within the mortgage industry and it is usually committed for either profit or housing purpose. Mortgage fraud can be said to have been committed on a property when there is a misrepresentation, deception or omission with regards to the property to in order to insure a loan.
Professionals within the mortgage industry sometimes deliberately withhold or don’t give full information about their clients credit/debit, employment status, condition and value of their property in other to secure a loan for them and maximize profits on loan transactions. These details are intentionally omitted by the loan officer, title company, insurance agent, real estate agent, mortgage broker or appraiser with the aim of maximizing profits on that loan transaction and gaining extra sales commission.
Borrowers are also culpable in committing this fraud and it is done with the help of officers that are processing their loans. The main reason borrowers partake in this is to obtain or maintain real estate ownership. They omit the details of their income, credit/debit status with the knowledge of their loan officers.
The two most common fraud scams within the industry are the air loan and appraisal fraud . Loans sometimes can be obtained on a nonexistent property for a nonexistent borrower, this is called air loan. Professionals within the industry combine efforts to create a ‘ghost borrower’, nonexistent property and title on such property, fake employment verifications, phone numbers, mailboxes etc. All these are done in other to make everything appear legitimate. This fraud just puts cash in the hands of the scammers without selling or buying any property.
Appraisal fraud on the other hand is also perpetrated by the industry professionals such as the real estate agent, loan officer and loan officer joining forces to maximize a purchase price and loan amount in order to increase commission.
Government agencies are stepping up to combat mortgage fraud in all its ramifications by monitoring the real estate industry/market. Professionals within the industry are required to be properly licensed and improve their skills. In addition, the activities of companies within this industry is being monitored and audited on a regular basis to ensure adherence to guidelines and best practices.
In general the industry is being properly regulated with the hope of totally eradicating the fraud within the industry.
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