Common types of mortgage fraud

On Behalf of | Mar 31, 2023 | Fraud

Although the housing market has changed over the past few years, individuals in New York and elsewhere are still buying and selling homes. While it is a transaction that occurs frequently throughout the nation, it doesn’t always go without issue. For some, this might be a denial of a loan or an inspection or appraisal that did not go well. However, it could mean allegations of mortgage fraud and potential repercussions far worse than losing a home.

What does mortgage fraud look like?

For the most part, when mortgage fraud occurs, there are usually two parties involved. The first party is the one providing the false information, and the second party is the one that relied on the false information to complete the transaction. This type of fraud could be committed by individual buyers purchasing a home or could be industry professionals seeking to profit from the fraud.

Five common types

There are five common types of mortgage fraud schemes. The first is using fraudulent supporting loan documents in a loan application. The next is foreclosure rescue schemes, property flipping, which is when a legitimate homeowner is scammed into a debt-consolidation scheme that involved upfront fees and the transferring of the title. The third is property flipping, which is when colluding parties repeatedly and fraudulently sell property to artificially drive up false appraisals.

The fourth type is equity skimming. This occurs when a mortgage is obtained in the name of a straw buyer’s name by an investor using a straw buyer, false credit reports and false income documents. The straw buyer then signs the property over to the investor who likely will not make payments but rent the property until it is foreclosed on.

The final type is called a silent second. This is when a buyer takes out a second mortgage to cover the down payment on the initial loan. Because the initial lender is not aware of this smaller, second loan, this is illegal.

Defense options

Facing mortgage fraud allegations can be a serious and complex matter. If you are being investigated or charged with this crime, a legal professional can help guide you through your defense options. This could help you avoid harsh penalties and protect your interests.