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Top 5 Tips to Avoid Mortgage Fraud
| | Thursday, February 15, 2007 @ 10:34 AM EST
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Contributed by: dee copeland
dee copeland Properties
Read more archived articles about Credit and Finance
You'd be surprised at some of the clever ways that you can become involved in a fraudulent transaction without your knowledge. Knowledgeable or not, if you're involved in fraud, you may still pay for the wrongdoing.
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EXAMPLES OF MORTGAGE FRAUD
1. Fraudulent appraisals. The lender may be cahoots with the appraiser, so ask sellers or buyers to sit back and let them inflate the price of the home. Sometimes selling agents are asked to increase the list price in MLS or buyers are asked to "go with the flow" on how much they will offer on the home.
2. Silent seconds. The buyer borrows the down payment from the seller through an undisclosed second mortgage. If it's not disclosed to a lender, you're committing fraud and the loan can be called due and/or you can be prosecuted. Let's not lie, hide, or deceive lenders. They don't like that.
3. Nominee loans/Straw Buyers. The identity of the true borrower is hidden by using another person for loan docs and credit. This isn't the same as mom buying a house and having her child live in it. This is when someone else's name is on everything, but you are the true borrower.
4. Equity Skimming. An investor uses a straw buyer, false income documents, and fake credit reports to obtain a mortgage. The straw buyer signs the property over to the investor using a quit claim deed, never makes mortgage payments, then rents the property until it's foreclosed.
RED FLAGS
1. Significant sales price adjustments that are not supported by comps.
2. Required use of a particular appraiser.
3. Down payment assistance programs that charge excessive fees.
4. Large seller contributions, possibly in the form of improvement allowances.
TIPS TO AVOID GETTING TAKEN (From www.HUD.gov)
* Shop around for a good inspector, lender, and real estate agent...even for NEW HOMES. Don't just automatically use the "preferred" professional.
* Do NOT let anyone persuade you to make a false statement on your loan application, such as overstating your income, the source of your down payment, failing to disclose the nature and amount of your debts, or even how long you have been employed. When you apply for a mortgage loan, every piece of information that you submit must be accurate and complete. Lying on a mortgage application is fraud and may result in criminal penalties.
* Do NOT let anyone convince you to borrow more money than you know you can afford to repay. If you get behind on your payments, you risk losing your house and all of the money you put into your property.
* Never sign a blank document or a document containing blanks. If information is inserted by someone else after you have signed, you may still be bound to the terms of the contract. Insert "N/A" (i.e., not applicable) or cross through any blanks.
* Be honest about your intention to occupy the house. Stating that you plan to live there when, in fact, you are not (because you intend to rent the house to someone else or fix it up and resell it) violates federal law and is a crime.
For more information, there's a great resource on Predatory Lending and Avoiding Fraud on HUD's website. There are also brochures available for REALTORS® at www.Realtor.org.
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NOTE: Dee Copeland is an investor specialist in the Greater Austin Real Estate Market. Contact Dee's team at http://www.DeeCopelandTeam.com. Visit the blog at http://www.TexasRealtyBlog.com.
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