Mortgage predatory lending or mortgage fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested party relied on by a lender or underwriter to provide funding for, to purchase or to insure a mortgage loan. Statistics from multiple sources indicate that predatory lending practices are on the rise in the United States. Some industry explanations for this increase point to recent high mortgage loan origination volume, the persistent desire of mortgage lenders to hasten the mortgage loan process and the introduction of nontraditional loans which contain fewer quality control restraints, such as low documentation and no documentation loans.
Mortgage predatory lending or mortgage fraud is generally divided into two categories:
- Fraud for property/housing. This entails the misrepresentations by the applicant soley for the purpose of purchasing a property for primary residence. This scheme usually involves a single loan. Although applicants may embellish income and conceal debt, their intent is to repay the loan.
- Fraud for profit. This involves multiple loans and elaborate schemes perpetrated to gain elicit proceeds from property sales. Gross misrepresentations concerning appraisals and loan documents are common in fraud for profit schemes and participants are frequently paid for their participation. The average consumer may not even realize that a fraud scheme such as this is taking place, and often times are an innocent party in this scheme.
One of the most common forms of mortgage fraud is illegal property “flipping” which involves a borrower constantly being “flipped” from one loan to another. This type of scheme is extremely profitable to the lender and also the broker because of multiple closing costs and money that is paid out of the flip. However, this scheme is devastating to the borrower, and can sap the equity of their home.
Recent statistics suggest that escalation foreclosures provide criminals with the opportunity to exploit and defraud vulnerable homeowners seeking financial guidance. These perpetrators can convince homeowners that they can save their homes from foreclosure through deed transfer and the payment of up front fees. This “foreclosure rescue” often involves a manipulated deed process that results in the preparation of either forged deeds or deeds that are signed without the homeowners understanding of what a deed really is and what they giving up. In extreme situations, perpetrators may sell the home or secure a second loan without the homeowners knowledge, stripping the properties equity for personal enrichment.
If you feel that you have been a victim of mortgage fraud please call the mortgage predatory lending attorneys at Schuler & Lee for a free consultation to determine your rights.