Mortgage Fraud: What Is Mortgage Fraud
Mortgage fraud is the practice of deceiving the mortgage lender by providing deceptive false information in order to deceive the mortgage underwriter and lender to fund a mortgage loan. Many home buyers who commit mortgage fraud do not realize how serious mortgage fraud is. Some examples of mortgage fraud is trying to persuade an appraiser to get a higher value by offering a bribe, manipulation of contracts where there is a kickback agreement after closing and hiding it from the mortgage lender, illegal sources of down payment funds, jacking up sales prices and making an agreement with the seller to get a kickback, falsifying tax returns and bank statements, and lying or misrepresenting information on the mortgage application. Mortgage fraud was one of the leading factors in the financial and real estate collapse of 2008 and mortgage fraud still exists today. More than 10% of the mortgage applications today contain false information that borders mortgage fraud.
Kickbacks Are Illegal
Any kickbacks among the realtor, mortgage lender, attorneys, or anyone associated with the origination and/or purchase of the subject property is illegal. A mortgage lender cannot give a realtor a kickback nor can a realtor give a mortgage lender a kickback for referring business. Same with attorneys, title companies, appraisers, and anyone involved in the mortgage and real estate purchase process. Bottom line is that referral fees are not allowed under any circumstances. The government does not waste any time in bringing federal charges to those who have kickback programs among licensed professionals.
Inflating The Purchase Price
Another common kickback practices that still occur today is when a seller inflates the purchase price and gives the buyers a kickback to promote the sale of their home after closing. This practice is an absolute no no in the mortgage business and if you get caught, there will be severe consequences.
Straw buyers are actual home mortgage loan applicants who apply for a mortgage loan as an owner occupied mortgage loan but have no intention of living in the subject property. Straw buyers mortgage loan applications are very common when the actual owner occupant mortgage loan borrower does not qualify for a mortgage loan due to not enough income documentation or poor credit scores and has a friend or family member to apply in their name just to qualify for the mortgage loan without any intent of them living there. Straw buyers who are family members normally do this to help the non-qualifying mortgage loan borrower and do not realize that they are committing mortgage fraud. If you are applying for a mortgage loan as an owner occupant residence, you are required to move in to the subject property within 60 days of closing on your home and you need to be an owner occupant for at least one year.
Tax Returns, Bank Statements, And Other Mortgage Documents
All tax returns, W-2s, bank statements, verification of rent, and other information you provide your mortgage lender will be verified and any altered documents is illegal and not only will the outcome be a mortgage loan denial, but the mortgage lender is required to report any false or doctored mortgage documentation to HUD and the FBI. No mortgage loan in the world is worth the risk of getting caught for mortgage fraud. To many, it might be a victimless crime but mortgage fraud is a very serious offense where if you are convicted of mortgage fraud, you can be sentenced to a maximum of 30 years in federal prison. I would be extremely leery of any mortgage loan officer who asks you to get a straw buyer or encourages you to doctor the information. In essense, the mortgage loan originator is inducing you to commit mortgage fraud.