Mortgage Fraud Crimes
Mortgage fraud happens when someone commits a misstatement, misrepresentation, or omission the course of the mortgage lending process with the intention that it be relied upon by a mortgage lender, borrower, or another party to the mortgage lending process (Pen. Code, § 532f; 18 U.S.C.A §1001; 18 U.S.C.A §1014). It includes:
- Fraud for Profit — Fraud for profit occurs when an industry professional or person with special knowledge or authority commit or facilitate fraud. Usually this sort of fraud involves a group of people and multiple transactions.
- Fraud for Housing — Fraud for housing, also called fraud for property, occurs when the borrower who is seeking to acquire or maintain ownership of a house uses false pretenses, such as misrepresenting asset information, personal debt or income amount.
Common mortgage fraud schemes or trends
- Foreclosure Rescue — This fraud occurs when a homeowner at risk of foreclosure or who is currently in the foreclosure process is targeted and then mislead to believe that they may save their home if they transfer the deed to the investor. Usually, what occurs is the mortgage payment is not paid by the investor and the property goes into foreclosure. A profit is made when the person targeting the homeowner sells the property to an investor or straw borrower, thus creating equity by selling the proceeds paid by the homeowners, and using a fraudulent appraisal.
- Loan Modification — When someone offers to assist a homeowner by renegotiating with the lender the terms of the loan. Homeowners are targeted when they are delinquent in their mortgage payments and are getting ready to lose their house. The negotiation process tends to be unfavorable to the homeowners, and significant fees are demanded to be paid up front.
- Illegal Property Flipping — This happens when the appraisal information is fraudulent. The property is purchased, falsely appraised at a higher value, and then quickly sold.
- Equity Skimming — A financier obtains a home loan loan in the straw buyer’s name and does not make any mortgage payments until the foreclosure occurs. Subsequent to closing the straw buyer will sign the property over in a quit claim deed. This will surrender all property rights and will not provide a guarantee of title.
- Commercial Real Estate Loans — Owners create false leases to acquire financing in order to exaggerate the building’s profitability. As a result, appraisal values increase and lenders extend loans to the owners. This causes property repairs to be neglected and loans to be defaulted causing the property to eventually be difficult to rent or repair.
- Air Loans — This is considered a nonexistent property loan. A broker will falsely invent properties and borrowers, and will establish and sustain custodial accounts for escrows. The purpose is to deceive creditors. Some brokers will create offices and telephone numbers in order to contact brokers to verify loan applications.