Definition Of Mortgage Fraud
The Federal Bureau of Investigation is the federal agency that investigates mortgage fraud. The term mortgage fraud is defined as any material misstatement, misrepresentatition, or ommission that is relied by a mortgage lender to fund, purchase, or insure a mortgage loan. This is how the FBI defines mortgage fraud. Referral fees and kickbacks used to be very common in the real estate business but now, any non disclosed referral fees or kickbacks are considered mortgage fraud. Inflating your income either by falsifying your tax returns or W-2s is considered mortgage fraud. Inflating the sales purchase price of a subject property and getting a kickback from the seller is considered mortgage fraud. Getting gift funds and repaying the gift funds at a later date is considered mortgage fraud. Gift funds cannot be repaid and the person receiving the gift and the donor of the gift both sign a statement stating so. Cases like this happen all the time but if you get caught, be prepared to be investigated by the FBI.
Occupancy Mortgage Fraud
One of the most common acts of mortgage fraud is when a non-occupied borrower applies for a mortgage loan as an occupied borrower because they want to get the property for a family member who does not qualify for a mortgage loan. The non-occupant borrower is known as a straw buyer. Cases like these happen all the time and to most folks, it may seem like a good gesture but this is not allowed and if a mortgage loan ever goes bad, you will get caught and charged with mortgage fraud.
Potential Violators Of Mortgage Fraud
Buyers, sellers, realtors, appraisers, attorneys, insurance agents, mortgage lenders, mortgage brokers, and anyone who is associated in the process of a real estate purchase, sale, financing are all potential violators of mortgage fraud. For example, how does an insurance agent commit mortgage fraud?
Case Study Of An Insurance Agent Committing Mortgage Fraud
An insurance agent can do a home buyer a major favor where he or she bills the homeowners insurance premium for less than the actual amount because the home buyer has a higher debt to income ratio. After the home buyer closes on the home and the mortgage loan is funded, the home buyer will then pay the actual annual insurance premium shortage. On this particular case study, both the insurance agent and the home buyer have committed mortgage fraud to deceive the mortgage lender give them a mortgage loan approval and close the mortgage loan. If the other parties had no part or knowledge in this scheme, then the home buyer and the insurance agent are the only violators of mortgage fraud. However, if it was the attorneys, mortgage broker, and realtor’s idea, then all three of them have committed mortgage fraud. No mortgage loan in this planet is worth the consequences of being accused and convicted of mortgage fraud. Mortgage fraud carries a maximum federal prison sentence of up to 30 years.
By Gustan Cho