Life In Wake Forest NC.....

Mortgage fraud is split into two categories - 

Fraud for property -    and Fraud for profit  

Fraud for property - Fraud for property entails misrepresentations by the buyer(s) for the purpose of buying a home as their primary residence. This fraud scheme usually involves a single loan. Although buyers may lie about their income and conceal debt, their intent is to repay the loan.  Rising home values of past made it hard for people to qualify for home loans and are considered the main reason for why this kind of fraud was so common.

Fraud for profit - involves multiple loans and elaborate schemes to make money from property sales. Fraud for profit schemes, involve loan document and appraisal misrepresentations. The people involved are paid for participating. Also, mortgage fraud perpetrators likely seized the opportunity to take advantage of the relaxed lending practices to commit fraud for profit.

The most common form of mortgage fraud is illegal property flipping which entails false appraisals and other fraudulent loan documents. Combating mortgage fraud effectively requires the cooperation of law enforcement and industry entities. No single regulatory agency is charged with monitoring this crime. The FBI, Department of Housing and Urban Development-Office of Inspector General (HUD-OIG), Internal Revenue Service, Postal Inspection Service, and state and local agencies are among those investigating mortgage fraud.

Perpetrators can include mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, trust account representatives, investment banks, and credit rating agencies. 

Despite increased scrutiny, many industry insiders will commit fraud to maintain or increase their current standard of living.  It had proven so lucrative that various organized criminal groups and gang members are sometimes involved in mortgage fraud activity. 

People living in neighborhoods affected by mortgage fraud see their property values suffer.  Properties purchased with fraudulent means are sold at artificially inflated prices, making properties in surrounding neighborhoods also become artificially inflated.  When this happens property taxes artificially increase. 

When unqualified homeowners begin to default on their inflated mortgages, properties go into foreclosure, neighborhoods begin to deteriorate and the surrounding properties and neighborhoods home values drop.  As a result, homeowners who bought their homes legitimately find it difficult to sell their homes.  The decline in home values has a direct negative impact to state and local governments.

Their ability to provide public services such as police, firefighters, teachers etc. becomes hindered because a large part of that funding comes from property tax revenue. 

Information for this series was gathered from mortgage fraud blog, the FBI 2008 fraud report and the IRS.

Home loans since 1977

  First Priority Financial is licensed by the California DRE # 654852  Nevin's California DRE license 016552

  The opinions expressed in this blog are not necessarily those of First Priority Financial.

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