Mortgage Loan Frauds
When you approach for a real estate loan and lie on the application form, it amounts to a fraud. It is a fraud even if you do not take the loan amount. Of late, hearing about mortgage loan fraud has become very common. There are several ways one can be involved in a mortgage loan fraud. |
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The definition of loan fraud according to the Federal Bureau of Investigation is as follows:
"any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan."
For example, if you fix up with a home seller to pay you cash for laying a new roof and if the mortgage lender is unaware as it is not included in the contract, then this amounts to loan fraud. Not disclosing amounts to lying.
If a borrower takes the down payment for a mortgage that does not have any, it is fraud. In this case the borrower and the seller exchange a silent second mortgage. This may not be recorded and the lender is unaware of it.
It is very difficult to verify the incomes of people who are self employed. Inflating the income and showing the same to the lender is also considered as a mortgage loan fraud.
Many people lie about living on the property because lenders usually offer high interest rates for non owner occupied properties. They look at it as high credit risk category. If you are not going to live in the house you are buying, then do not lie about it because it amounts to mortgage fraud.
Some people show inflated purchasing price, and falsify deposits. These are other ways to commit mortgage loan fraud, and should be avoided under all circumstances.
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