Mortgage fraud is defined as knowingly misrepresenting or concealing information in order to obtain or give a mortgage loan. According to Freddie Mac, there are two types of mortgage fraud, fraud for property and fraud for profit. Fraud for property is the process in which potential borrower’s misrepresent information on their loan application. Whereas fraud for profit, is the process, in which a group or individual defrauds a prospective homebuyer in order to make profit.
Know Your Credit Score
When applying for any type of loan, whether that is a car loan or mortgage, it is important to know and understand your credit score. Credit scores range from 300-900, with a perfect score being 900. When it comes to mortgage fraud for profit, lenders may trick you into believing you have a poor credit score, which inflates their bottom line profit. Borrowers with scores between 700 and 900 typically receive better mortgage rates; however, if you do not know your score you may end up paying much more than you should. Websites such as www.annualcreditreport.com give users a free credit check once per year (no free score), however, in order to receive a credit score, users must pay a small fee.
Mortgage fraud does not only happen to buyers, it can also affect lenders. For example, you want to purchase a $300,000 house, with your income and line of credit you only qualify for $250,000. Therefore, to qualify for the additional loan amount you increase your salary earnings on your loan application. For the sake of argument, let us say you increase your earnings by $10,000 per year. No harm right, you will make more money down the road anyway? Wrong. According to Freddie Mac, this is considered fraud for property and can be criminally prosecuted.
Get an Attorney
As an economist, I specialize in understanding complex mathematical equations and data, and then synthesizing my findings in reports. I have taken advanced calculus and numerous statistics classes; however, I still have trouble with loan terms. Often they are hard to understand and have hidden fees that are not thoroughly explained to the borrower. Anyone considering loans that they do not 100 percent understand should consider hiring an attorney. Although attorney fees are considerable, they make help you save thousands over the course of a mortgage loan.
Avoid Easy Way out Scams
Offers that seem too good to be true often are. For example, any business or individual that offers to help “bail” you out of your upside down (owe more than the house is worth) mortgage, are often scams. Another legal scam tactic is a reverse mortgage, which is where a company pays you an amount of money each month, similar to a mortgage payment. The company ends up purchasing your house for the present day value and in 30-years owns the property. In turn, they end up making 30-years of property value money, leaving your next of kin with nothing. Do your homework before getting into or out of a mortgage. A common mistake is that homeowners become so desperate that they are willing to find an easy way out, however that is simply not a good solution for most homeowners.