Mortgage fraud is a little different case from what the predatory lending is. In predatory lending, we see, only one party involved, and it’s the money lender. However, mortgage fraud is more complex term, and needs more concentration to be comprehended than predatory lending. There may be variety of professionals indulged in it such as straw buyer, money lender, servicing companies, borrowers, and homeowners etc. In this article we will focus on all these types of mortgage fraud, which are pretty common in this era of real estate business. Understanding these types will definitely help one avoid a mortgage fraud. So, be focused and carefully read.
Mortgage Home Scheme:
First of all, I would like to mention the fraud, which has the borrowers involved in. This, commonly noun as ‘home fraud’, is very familiar, especially in American society as well as in most parts of the world. The borrowers involved in scheme, aim to overstate the value of their property, or seem to exaggerate their monthly income. Stating their scale higher than actual is also pretty usual practice among them. They do that cleverly to get more amount of loan in comparison to what they might have by showing their stats honestly. The temptation to get their dream house, that seems unaffordable for them by being honest, urges them to do so.
Rescue Fraud:
This happens when a person (agent or a stop foreclosure scam firm) comes to know about the house under a foreclosure process; located somewhere. He will contact the borrower, and offer his services. Two possible ways, he has to choose between. Either; he will ask the borrower to transfer all his property on his name; and latter on, he will sell all that property, and run away with all the money, he gets after doing so, or he will charge the borrower by convincing him that he is about to negotiate with the lender, but he will have no negotiations at all. Borrowers encourage the criminal to commit that fraud in a state of desperation. Though they are not quite sure, yet they feel that this person might be helpful for them to stop foreclosure; so, why not take a chance?
Laundering The Dirty Money:
Some crime organizations are pretty fond of making this fraud. Money, obtained by illegal sources, is washed out through real state. After earning money by doing dirty crimes, like selling drugs, committing theft or doing something illegally, they invest it in real estate sector, and then sell it abruptly to get their money back. After this, none can claim about their assets to be unlawful.
Occupancy Fraud:
This will take place exactly when a borrower decides to attain an investment property, unfortunately misusing the loan application; stating that he will acquire the property as a primary real estate asset or a second home. If undiscovered he will successfully get a lower interest rate than was warranted. This is due to loan companies usually charge lower rates to owner-acquired homes and higher on non-owner-acquired homes. Traditionally this has higher delinquency rates. The lender suffers from insufficient return on investment and is likely to face a loss. Generally a lender issues large amount of loan on owner-acquired homes in comparison to the loan amount for investment properties. Moreover when occupancy fraud takes place; the possibility of unpaid taxes on gains is higher. Now this surely, is another fraud, as the borrower misleads the risk to lender to gain such loan terms which are definitely in favor to a borrower.
Some, other frauds like wrongful foreclosure and short sale scheme are also worth mentioning in this respect. Beware of all what has mentioned above to escape any kind of threats in future. SelfGrowth is your no.1 source to get awareness pertaining to mortgage in the best possible way. Keep in touch.
Margarate Peterson writes for the victims of foreclosure fraud and predatory lending. Having a masters in business administration and years of her experience working as a real estate agent along with well-known attorneys, she knows exactly how lenders and borrowers can commit crimes.