Mortgage loan fraud can be extremely costly to both homeowners and lenders. The most common types of mortgage loan fraud occur when a prospective borrower misrepresents or omits information on a home loan application or inflates the value of their home for the purpose of misleading a lender.
As with most types of fraud, there are certain situations that scammers like to target. Factors that increase the risk in a mortgage loan transaction include borrowers facing foreclosure or loss of employment, applicants with credit issues, reverse mortgages, and first-time homeownership. Scammers will often falsely promise victims that their homes will be saved from foreclosure with term modifications and debt management. When it comes to buyers, tactics include offering mortgage rates that are significantly lower than market rates, scheduling payments that are considerably larger than disposable income, over-extending property values, and devaluing credit scores. They may also prey on vulnerable homeowners or inexperienced buyers who lack education or financial security.
Mortgage loan fraud can take many forms, but the four most prevalent scams are listed below.
- Mortgage Wire Fraud: Mortgage wire fraud happens when a scammer persuades homebuyers or the closing agent to route the closing cost payment to an illegitimate bank account,…
