Fraud Information

Today’s Financial Crisis and You

Facing the biggest financial crisis of our lifetimes is daunting. Not only has the U.S. been affected, but now the financial crisis has expanded globally. These issues are affecting people of all economic backgrounds. What began as a mortgage meltdown has escalated to the failure of major financial institutions. Every aspect of your finances has been affected. Some fear foreclosure; others are concerned that their company won’t have the funding necessary to continue operations; still others are faced with loss of their retirement funds. Nonetheless, the consequences of this financial crisis can be catastrophic to your financial well-being. Although the bailout plan has been passed in order to prevent total collapse of our financial markets, it does not resolve the crises that U.S. individuals are facing. Evaluate your situation to determine what options are available to resolve your issues. Consult with an attorney who specializes in the legal area in which you need assistance. In some instances, the law provides us the ability to recover from the responsible person or business entity. The federal Government has started investigating some of the firms involved in the economic downfall. Whether or not consumers or investors will have any financial recourse has yet to be determined.


Mortgage Fraud

Mortgage Fraud is one of the fastest growing white collar crimes in this country. It hurts not only buyers, sellers, banks, and lending institutions but ultimately it attacks the backbone of the U.S. economy.

Mortgage Fraud occurs when 1.) A buyer or seller knowingly submits false and misleading information – or omits key facts – in order to buy or sell a property, or 2.) The lender or alleged real estate professional deceives their client in order to enrich themselves.

Because so many people are involved in a mortgage transaction – the buyer, the seller, real estate brokers, banks and underwriter, the appraiser, the title company, etc. – it is sometimes difficult to unravel the layers when a deal goes sour.

Senior citizens are the frequent targets of con artists who prey upon the equity in other people’s homes. Elder Abuse statutes provide some protection for seniors who are either evicted or robbed of their equity savings though various mortgage scams.

According to the FBI watch list, the top ten states for mortgage fraud activity in 2004 were: California, Nevada, Utah, Arizona, Colorado, Missouri, Illinois, Maryland, Georgia, and Florida.

Mortgage fraud is divided into two main areas: 1.) Fraud for property, and 2.) Fraud for profit.

Fraud for Property: This accounts for 20 percent of all property fraud. It occurs when the borrower makes the misrepresentations about his/her income, personal debt or the property value in order to secure a housing loan.

Fraud for Profit: This is by far the largest area of property fraud and involves industry professionals as well as con artists.


The following are specific types of Mortgage Fraud:

Predatory Lending: When the lender refinances with a sub prime loan loaded with excessive fees that provides no real benefit to the borrower. The loan is designed to be unworkable so that the borrower is eventually forced to hand the property back to the lender, who is then in a position to re-sell it.

Wrongful Foreclosure: This occurs when the lender promises the borrower that he/she will not foreclose on the property and then does so.

Broker Non-Disclosure: A broker may have a conflict of interest which leads him/her to keep certain facts about the property or the sales transaction from the client, who loses out after the deal closes.

Backward Application: A borrower alters his/her income to meet the loan criteria after selecting the property he/she wants to purchase.

Air Loans: There is no property and therefore no collateral to secure the real estate loan. Some con artists go to elaborate measures to invent a borrower with an impressive credit history for loan verification purposes.

Silent Seconds: The buyer of a property either borrows the down payment from the seller but does not disclose the second mortgage to the lender, or created the illusion of a down payment through a fraudulent gift letter. The primary lender believes wrongly that the borrower has invested his own money in the property.

Straw Buyer: When the buyer puts the property in the name of another person to conceal the identity of the true purchaser.

Flipping: When a purchased property is falsely appraised at a high value and then quickly sold or flipped for profit.

Default Scheme: Desperate homeowners – who are in foreclosure or at risk of defaulting on their loans—are duped to believe they can save their homes by transferring the deed and paying up-front fees to another party.

Equity Skimming: An investor uses a straw buyer to obtain a mortgage loan. After the closing, the investor rents out the property and collects money on it, making no mortgage payment until the foreclosure takes place.
Who can Sue

Mortgage fraud lawsuits can be confusing because of the array of financial documents and conflicting stories by the various persons involved. Lenders will often try to stall the litigation process by dragging their feet.

If you have been the victim of Mortgage Fraud, find a real estate attorney who understands mortgage finance as well as criminal fraud, and is comfortable in litigation. Although 97% of all lawsuits settle without going to trial, you need to be prepared in the event your case does go before a judge or jury.

Different states may have different laws relating to Mortgage Fraud, so it is important that you select an attorney licensed in the state where your property is located.
Interesting Facts

The truth in Lending Act specifies information that needs to be in a mortgage loan document so that borrowers are not misled by lender jargon. According to the Mortgage Bankers Association, the delinquency rate for all U.S. Mortgage loans (on one-to-four unit residential properties) was 6.35 percent at the end of the first quarter of 2008. This was up 53 basis points from the fourth quarter of 2007, and is the highest delinquency figure since 1979.

How to Avoid Becoming the Victim of Mortgage Fraud:

  • Beware of no money down loans. This is a gimmick used to entice buyers to purchase properties they cannot afford.
  • Never sign a blank document or a document containing blanks.
  • Get referrals before doing business with a real estate agent, and check out their license with your state’s regulatory agency.
  • Walk away from any ‘expert’ who offers to falsify the information so that you qualify for a loan.
  • Do not let anyone convince you to: 1.) Borrow more money than you can afford to repay, 2.) Overstate your income or employment history or 3.) Fib about the source of your down payment.
  • Be wary of unsolicited property offers as well as promises of a lucrative profit within a short time.
  • Check recent comparable sales and tax assessments to verify the true value of the property you wish to purchase
  • Ensure that the seller’s name on the sales contract matches the name on the county property records, and verify that the property address is spelled out and correctly identified on any transfer document.
  • Review the property’s title history to determine if it was ‘flipped,’ indicating that it may be inflated in price.
  • Know and understand the terms of your mortgage and carefully review all the loan documents at closing. Bring a calculator with you to ensure that all figures are accurate and that the closing costs are the same as you agreed to.
  • Be wary of emails or web ads that promise to eliminate your mortgage loan while also requesting an up-front document preparation fee.


Potential Recovery

The victim of a mortgage fraud may be lucky enough to fully or partially recoup damages if they take prompt legal action. In some cases, the con artist who swindles the buyer or the home owner may face charges such as grand theft, conspiracy, elder abuse or bait-and-switch, and can serve jail time, as well as be forced to pay restitution.

News

Mortgage Daily news
http://www.mortgagedaily.com

Mortgage Bankers Association
http://www.mbaa.org