Mortgage Fraud

Financial crimes are one of the fastest growing areas of criminal activity in the United States and one of the fastest growing areas of financial crimes is mortgage fraud. Fraud involves two parties: one makes a false statement of fact material to the business involved and the other party relies on that statement to their detriment.  In mortgage fraud false or inaccurate information in connection with a mortgage application is provided and that information causes a lender or another in the chain of approving and funding that loan to make the loan or to make the loan on terms and conditions different than if the true facts were known.

Mortgage fraud includes a whole category of illegal business dealings. The different schemes that may be used, but are certainly not limited to are:

  • Property Flipping
  • Equity Skimming 
  • Application Fraud
  • Credit Misrepresentation
  • Income and Asset Misrepresentation
  • Down Payment Misrepresentation

Fraud for housing or Profit

Mortgage industry professionals and law enforcement break these different schemes into two groups:

  • There is “Fraud for Housing” in which a borrower will knowingly provide false or at least inaccurate information regarding his or her qualification for the loan. This might be something as innocent sounding as fudging a little on their income levels or employment in order to qualify for the loan or for better terms on a loan.

  • There is also “Fraud for Profit” which is sometimes referred to as “industry insider fraud” because it typically requires at least the cooperation, if not the participation, of an appraiser, real estate broker, mortgage broker or other real estate professional.  Such cooperation or participation does not always require any action on the part of the real estate professional.  It can be implicit through the real estate professional’s failure to disclose or correct a representation made by someone else which the professional knows to be false.

Source: National Association of REALTORS®