There are many different types of scams that perpetrators use to steal money. Mortgage fraud is one of them, and since the pandemic, it has grown by almost 40%. Mortgage fraud contributed to the Great Recession in 2008. In this article, we explain what mortgage fraud is, the common types of fraud, and what you can do to protect yourself from it.
What is mortgage fraud?
Mortgage fraud is when someone intentionally lies or omits information on a mortgage application. According to the FBI, mortgage fraud is a “crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender. A lie that influences a bank’s decision — about whether, for example, to approve a loan, accept a reduced payoff amount, or agree to certain repayment terms — is mortgage fraud.”
Mortgage fraud falls under two main categories:
- Fraud for profit: This is when people commit mortgage fraud to make money. They tend to be industry insiders such as bank officers, mortgage brokers, appraisers, attorneys, loan originators, and other professionals in the industry. These people typically have specialized knowledge or authority that helps them commit the fraud. The goal isn’t to obtain housing, but to misuse the mortgage lending process to steal money from homeowners and lenders. The FBI prioritizes fraud for profit cases.
- Fraud for housing: This is when people commit mortgage fraud to secure a house. They misrepresent…
