What is Mortgage Fraud?

Mortgage fraud refers to any act of misrepresentation or omission committed by a borrower or lender to purchase or fund a mortgage loan. To put it simply, if you lie or skip some information on your mortgage application on purpose, you are committing mortgage fraud. This fraudulent activity comes in different forms but some of the most common ones are enumerated below.

1. Falsification of Documents

Submitting fake documents and using false information on documents constitute mortgage fraud. False information can be anything from borrower’s income information to home appraisals, inspections, assets and so on. Any part of the mortgage paperwork that has been falsified is considered mortgage fraud.

2. False Residency

Related to the previous type, false residency involves putting incorrect or fictitious address information on the application loan. This is typically done in mortgage programs that allow loans on primary residences. Some applicants will take on a mortgage on a vacation home or income property even when that is not allowed.

3. Nondisclosure

When a borrower or lender purposely omits significant information required for getting a loan, this would also fall under mortgage fraud. Some borrowers deliberately omit information such as other loans, bankruptcy, assets, and so on, as they know that these factors will affect their mortgage application.

4. Inflated/Deflated Figures

Many loan applicants who commit mortgage fraud do so by inflating or deflating the numbers stated on the application form. For example, a borrower may increase his/her monthly income to be able to secure a loan more easily. Recognizing this problem, lenders have required stated income loans for self-employed individuals, since their income is hard to determine. However, even employed borrowers have been known to inflate their income despite the possibility of detection. Another scheme involves increasing the amount of appraisal in order for the person to get a loan that is more than what a property is worth.

Getting Legal Help

Borrowers are not the only ones who commit mortgage fraud. It can also be performed by lenders, brokers, and real estate agents. In the end, it does not matter who does it. The bottom line is that it is illegal and dangerous. If you have ever been victimized by mortgage fraud or caught in this kind of predicament, be sure to consult your lawyer and get legal advice immediately.