The Mortgage Fraud Crisis
In the United States mortgage fraud is a problem on the rise
. Every home owner wants their home equity to be larger than the loan on their home. With the latest property craze in the house market there are some who try to take advantage of the market and make a fast profit. Here are some mortgage scams to be wary of.
Property flipping is the first. This happens when property is purchased, the property is incorrectly appraised for an inflated price and then quickly sold. The incorrect appraisal is what makes this practice illegal. The practice almost always involves fraudulent land appraisals, phony loan documents, inflation of the buyers income, kickbacks to the buyer, investors, property or loan brokers, the appraiser and title company personnel.
Let us say a house worth $50,000 might be appraised at $100,000 or more in such an illegal practice. Next is the silent second, as it is known. This happens when a buyer of property borrows the funds to make a down payment from the person selling the land by issuing a second mortgage but does not disclose it. The primary lender of funds believes the person borrowing is actually investing his own money for the down payment.
However, the truth is that the money is borrowed. The second mortgage may not be recorded so the primary lender of funds is unaware of it. Then there is what is known as the nominee loans and straw buyers. This occurs when the borrower's identity is hidden and the nominee allows the borrower use her name and her credit report on the application for the loan.
Also there is the fictitious or stolen identity issue which may be placed on the application for a loan. Possibly the applicant is involved in a theft of identify scam where the real man or woman is unaware his or name, personal information, and credit history is being used for an application for a loan.
There is the inflated appraisal. The appraiser is conspiring with the borrower and sends in an appraisal to mislead the lender. The false report from the appraiser lists a value that has been inflated. In a foreclosure scam the schemer looks for home owners who may default on their loan or for those home owners already going through foreclosure.
The scam artist fools the homeowner telling him he can save his property if they agree to transfer the property deed and if they pay the up front charges. The scam artist makes cash from these scams by remortgaging the property and taking the money the owner paid. The most common foreclosure tricks are the phantom help, the bust out, and the bait and switch.
The equity skimming scam involves an investor who uses a straw buyer. He uses misleading income records, and incorrect credit history records to obtain a loan in the straw buyers name. Before escrow closes the straw buyer signs the property over to the investor with a quit claim deed which turns over all rights in the property and provides no guaranty of title. The investor makes zero loan payments and then rents out the property until the property is foreclosed on months later.
The Mortgage Fraud Crisis
By: Adrianna Noton
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