Mortgage fraud

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Permalink Reply by HUD Foreclosed on May 29, 2008 at 2:35pm

Mortgage fraud is nothing more than steps deliberately taken to deceive a lender, usually through unjustified income and employment claims. The catch is that such claims are sometimes made without the knowledge of the borrower.

The best way to avoid mortgage fraud is to take four steps.

First, speak with local real estate brokers and ask them to recommend lenders who keep their promises regarding rates and terms -- and who deliver promised funding by closing.

Second, finance with an FHA- or VA-backed loan. They have tough underwriting standards that discourage funny business.

Third, always make sure that the person selling the property is actually the owner. Ownership can be demonstrated by looking at tax records, doing a title search or checking the latest tax bill.

Fourth, use your own experts. Have a buyer broker, get a professional home inspection and do not allow the seller to select the lender or settlement provider. Instead, find your own lenders and settlement provider before you enter the marketplace and get pre-approved for financing before making an offer.

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Permalink Reply by Guy M-Stinson on January 21, 2009 at 6:05pm

I think one of the biggest areas of, what is in my opinion a form of fraud, is a lack of disclosure by a broker or agent to the prospective client. The need to close the deal is placed above full disclosure so that the client ends up buying what he or she cannot afford in reality - hence many of the foreclosures that we see today.

This is compounded by the fact that homes are sold as a product and not as a financial 'investment'. To clarify what I mean by that statement, we recently bought a property. Nobody suggested that we sit down and do an analysis on the impact that this would have on our financial future, investments, college funds, debt, retirement and so on. However, since I know how to do these things, I did my own analysis. I am now on track to paying off our mortgage in under 10 years, while saving over $100,000 in interest, thus putting a whole lot in my pocket. That is way better than facing 30 years of payments, the (high) risk of foreclosure, minimal equity build up and little to nothing extra in my pocket at the end.

So although this is not technically fraud, the lack of awareness regarding this issue has a similar outcome to fraud in that masses of people are exposed to the risk of losing their wealth unnecessarily.

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