Common Types of Mortgage Fraud

 Posted on June 29, 2018 in Fraud

Mortgage fraud encompasses several fact patterns or situations all of which are illegal under federal law. Mortgage fraud is characterized by some type of “material misstatement, misrepresentation, or omission in relation to a mortgage loan that is then relied upon by a lending bank,” according to the FBI.

Thus, any lie that would influence a lender’s decision qualifies as mortgage fraud. The decision could relate to loan approval, reduced payoff amount or to repayment terms. Often mortgage fraud scams involve identity theft or income and asset falsification.

While the classic case of mortgage fraud is fraud perpetrated by the borrower, mortgage fraud cases have arisen in the aftermath of the housing market collapse when distressed homeowners were targeted by financial institutions. Even though the crime of mortgage fraud has evolved over time, there are several types that are seen regularly.

• Property flipping. Property flipping usually involves a party buying a property, renovating it and selling it at a profit. In most cases, property flipping is completely legal. It becomes illegal when the flipper increases the sale price without making any improvements. In order to effectuate this scheme, a corrupt appraiser is usually involved. The appraiser is needed to falsely inflate the worth of the property.
• Occupancy fraud. This type of fraudulent scheme is used by investor-buyers seeking to take advantage of better loan terms that are extended to mortgages of owner-occupied properties. A real estate investor would be convicted of occupancy fraud when he or she misrepresents to a lending institution that the mortgagee will be living at the property.
• The straw buyer scam. This fraudulent scheme occurs when a someone uses (or allows someone else to use) his identity to obtain a mortgage for someone who would not otherwise qualify. The straw buyer scam is often used by investors in an attempt to cover up other fraud. Straw buyers may not be aware they are being used for such a scheme. Recently, a sitting Cook County judge was convicted of mortgage fraud that involved a straw buyer.

Contact a Chicago, IL Mortgage Fraud Lawyer

If you are accused or suspected of mortgage fraud, the most important thing you can do at this juncture is retain an attorney. It is generally unwise to speak to authorities without first discussing your situation with a knowledgeable attorney. The mortgage fraud attorney at the Law Offices of Hal M. Garfinkel LLC, Chicago Criminal Defense Attorney offers free initial consultations. To arrange your first meeting with a Chicago, IL criminal defense attorney, call 312-629-0669 today.

Sources:

https://www.fbi.gov/investigate/white-collar-crime/mortgage-fraud

https://www.investopedia.com/articles/mortgages-real-estate/10/how-mortgage-fraud-affects-markets.asp

http://www.chicagotribune.com/news/local/breaking/ct-met-judge-guilty-mortgage-fraud-20180215-story.html