What do professionals in the loan transaction chain, house flippers and potential homeowners all have in common? All could engage in acts of fraud. Sometimes, in an effort to maximize our own profits or qualify for a mortgage for our dream home, we engage in acts that could be considered mortgage fraud.
What is mortgage fraud?
Fraud in general involves deception on some level via the misrepresentation of facts or figures. Mortgage fraud involves deception relating to property being sold or a mortgage applied for.
The victims of mortgage fraud can be underwriters or lenders who give out a loan based on false information.
While industry professionals can commit mortgage fraud, so can individuals who are buying a home, investors making misrepresentations through rentals, or flippers who engage in appraisal fraud to get more from the sale.
Fraud for profit versus fraud for housing
Mortgage fraud can be further broken down into two categories: fraud for profit and fraud for housing.
Fraud for housing occurs when a borrower who wants to buy a home makes a misrepresentation in the mortgage application process. They may inflate their income, misrepresent their debts or manipulate the value of the property. The end goal is to purchase or keep a piece of real estate.
Fraud for profit occurs when someone with inside knowledge or authority engages in fraudulent acts for their own gain. The goal is not to purchase real estate, but instead to steal funds from lenders or homeowners via the mortgage lending process. Any professional along the chain of the loan transaction can commit fraud for profit.
You may not mean to commit fraud, but sometimes we take measures when trying to benefit ourselves financially that are considered fraudulent. If you are accused of mortgage fraud, you will want to take the steps necessary to protect your interests and your professional reputation.