There are 2 type of mortgage fraud.
- Fraud to get a property
- Fraud to make a profit
The first is were someone lies about facts to get a loan to buy a property.
The second is where someone lies about facts to make a profit.
Fraud is committed by falsifications in the following ways:
1. Loan application fraud. Where an applicant lies about their income or their job. Perhaps the down payment they are making was given to them by the person selling them the home and the value of the home inflated to cover it.
2. Exaggerated appraisals. Appraisal is an art, not a science. Who can really be sure just how much a better view, or a swimming pool (for example) adds to the value of the property? The buyer wants the house, the seller wants to sell the house, the real estate broker wants to make the commission, the mortgage broker wants to make a commission. There is a lot of pressure on that appraiser to massage the figures a little to create a value that makes all these people happy.
Not to mention the possibility that a crooked appraiser could be in league with a crooked seller or borrower to give appraisals that are grossly exaggerated.
3. Falsified or fake credit reports. It’s really not that hard to use modern technology to “clean up” a credit report by copying it and “losing” some bad stuff.
4. False income. Applications can give the phone number, not of the company where the person supposedly works, but of a friend. The answer, look up the phone number of the employer in the white pages. Listen out for tell tale sounds, like children in the background in a supposed office setting.
5. Forged tax returns. Easy enough to fake using products like TurboTax ® etc. The answer, ask the borrower to sign Form 4506 and get a copy direct from the IRS. Click here for a copy for form 4506.
6. Fake title insurance.