In tough economic times, real estate mortgage fraud generally increases. It’s a good time to buy, but buyer beware.
Generally speaking, most people are honest and play it straight when it comes to dealing with mortgages. However, having said that, there are crooked mortgage brokers, cheating home buyers, dishonest real estate agents and brokers, and less than honest real estate investors. If you have the misfortune to run across one or more of these individuals, you may be in trouble; something you want to avoid.
Right now financing is fairly easy to secure in order to take advantage of some good deals on homes, but buyers need to beware of getting into hot water. If a buyer gets a loan, they can get some super deals right now. However, can they get that loan? It seems some buyers make up the numbers or take other risks to get the money, and while that doesn’t sound like such a big sin, it is mortgage fraud. Other ways you can commit mortgage fraud are to take money out of the bank and pay off a debt, but not tell the lender; buy a vehicle just before the loan closes and say nothing about it and/or get more credit for something/anything and don’t tell anyone.
Other ways that fraud happens is when a buyer makes any kind of an agreement the bank doesn’t know about (called a side agreement); when an adjustment is made at closing and isn’t shown on the HUD-1 settlement statement; or when part of a down payment/closing costs comes from sweat equity.
There are so many things that constitute mortgage fraud, it may surprise you, simply because you didn’t stop to think about things like the fact that you borrowed part of the down payment, you quit or started a new job and said nothing to the bank, or if you don’t actually move into the house after you have certified to the bank you are intending to be an owner/occupant.
Mortgage fraud is really easy to do but not so easy to reverse and the Real Estate Settlement Procedures Act is painfully clear on how a closing is to proceed, even more so with one that is subject to financing. The bottom line is that “any” statement you make to the bank which isn’t the whole truth and nothing but the truth has the potential to be considered fraudulent. This includes changes in your health, racking up high medical bills, or buying that dream car and not mentioning it.
Just as an increase in salary needs to be reported, so does a decrease. This applies on those loans aimed at low income buyers. It’s clear that if the borrower makes more than the limit allowed, he doesn’t get the loan. Even if you get a major hike in salary just before you close, you need to tell the bank that as well.
At each stage of the process of getting a loan and buying a house, there are many opportunities to be dishonest and just as many to get ripped off by someone else. If you have questions about the process, have been ripped off or have been accused of mortgage fraud, you will want to speak to a competent lawyer and find out what your rights are and what you can do.