- The FBI investigates mortgage fraud in two distinct areas:
fraud for profit and fraud for housing.
- Illegal property flipping is best described as
purchasing properties and artificially inflating their value through false appraisals.
- Predatory lending typically affects senior citizens, lower income borrowers and applicants with low credit scores. Predatory lending forces borrowers to
Predatory lending forces borrowers to pay exorbitant loan origination/settlement fees, subprime or higher interest rates, and in some cases, unreasonable service fees.
- A builder-bailout scheme can occur when
a builder or developer experiences difficulty selling his inventory and resorts to using fraudulent means to unload properties
- Short sale fraud schemes occur when
the perpetrator uses a straw buyer to purchase and ultimately default on a home loan, creating a short sale situation so that the perpetrator can take advantage and purchase the home at a discount.
- An additional appraisal may be required if
if a prospective purchase is a “flipped” home with a higher-priced mortgage loan.
(Flips are defined as resells within 90 days with buyer paying a minimum 10 percent price increase or resells within the past91-180 days with buyer paying a minimum 20 percent price increase. )
- Air loan –
non-existent loans and no-collateral loans.
- Deed scam –
forged seller’s signature on the deed. Property is fraudulently transferred, and deed recorded. Thief mortgages property for cash-out and walks away.
- Unrecorded or silent second –
buyer gives a seller a second mortgage without informing the lender or makes the lender aware but never intends to file the lien or to make any payments to the seller, with the seller agreement.
- Loan flipping –
an abusive practice in which a loan is refinanced without any tangible net benefit to the borrower. A form of equity stripping.
- Occupancy Fraud –
is related to the applicant lying about the home being owner occupied. An owner-occupied home can often get a lower interest rate than investment properties.
- Bait and Switch –
an alluring but insincere offer to sell product or service. Purpose is to switch consumers from buying advertised product to something else. It’s still bait and switch if consumer chooses other product/service.
- Switch after Sale -
accepting a deposit for product, then switching product to a higher priced item. Failure to make delivery of product within reasonable time or make refund. Delivery of the advertised product, which is defective, unusable, or impractical for the purpose represented or implied in the advertisement.
- Straw buyer –
A straw buyer is a person who makes a purchase on behalf of an other person. The borrower uses someone’s name (and credit) to purchase the property.
- Illegal Flipping occurs when a property is purchased at a low price, appraised at an inflated value without any valid reason for the increase, and then
resold at a much higher price
- Skimming A form of
identity theft involving compromising credit card readers to clone bank and credit cards.
- Equity Skimming –
offering to assist homeowners facing foreclosure through buying their home and then selling it back to them, usually at rates and terms guaranteed to result in default and loss of all equity, or they refinance the home, take out all the equity, then try to sell it back to the borrower, who cannot afford the new home price.
- Spamming A form of identity theft involving sending unsolicited
e-mails designed to trick recipients into providing personal information.
- Hacking A form of
identity theft involving accessing computer systems and networks to steal information.
- Identity Theft All types of crime in which someone
wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.
- FHA imposes restrictions requiring the borrower not to
not to resale the property for the first 90 days.
- FHA requires the lender to
investigate the transfer history of property for the past three years before resale, to identify potential flipping schemes.
- Elder Abuse when elderly homeowners are required to apply for and obtain mortgage loans that they do not want. Oftentimes, a child or caregiver forces this upon them. If an MLO is presented with this situation, he should
take the consumer’s application, but before actively proceeding with the loan request, try to conduct a one-on-one conversation with the senior to determine if he is being forced to obtain the loan.
- Predatory lending involves loans that take advantage of ill-informed consumers through
through excessive high fees, misrepresented loan terms, frequent refinancing and prohibited acts.
