As an NMLS licensed Mortgage Loan Originator, I did my eight hours of annual continuing education today. While much of it was specific to the lending community, I found the section on mortgage fraud trends to be very interesting and applicable to a broader audience of real estate professionals. This blog will be the first in a three-part series on Mortgage Fraud Trends.
There are two kinds of fraud categories: Fraud for Housing and Fraud for Profit.
Fraud for Housing takes place when a buyer commits fraud so they can purchase a home for their personal use. The fraud is committed though forged/altered documents or otherwise leading the lender to believe they have the income or assets needed to purchase the home. Some buyers are helping out family members and purchase the home as their residence but intend for a family member to reside and make the mortgage payments.
Fraud for Profit schemes usually involve multiple individuals such as appraisers, lenders, real estate agents, and closers. The intent of these fraud rings is to make a profit through inflated appraisals or fraudulent documents/identities.
The FBI has identified eight different kinds of Fraud for Profit Schemes in today’s real estate market:
- Property Flipping
- Silent Seconds
- Nominee/Straw Buyer Loans
- Fictitious/Stolen Identities
- Inflated Appraisals
- Foreclosure Schemes
- Equity Skimming
- Air Loans
The Federal Bureau of Investigation (FBI) typically does not investigate Fraud for Housing but has stepped up enforcement of Fraud for Profit rings.
In the next part in the series, I’ll cover the first four Fraud for Profit Schemes.
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