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Be Aware of the 6 Types of Mortgage Fraud On the Rise
Be Aware of the 6 Types of Mortgage Fraud On the Rise

Wednesday, October 3, 2018

Where money is involved, there will always be the threat of fraud. As a real estate expert, it is my job to closely follow trends that may be affecting the market and guide my clients accordingly. As such, I would like to discuss 6 types of mortgage fraud that are becoming more prevalent in this country, due to rising home prices and strong demand. In this blog I will explore fraud for housing, which is committed by borrowers who misrepresent or omit relevant details about employment and income, debt and credit, or property value and condition with the goal of obtaining or maintaining real estate ownership. Research shows that fraud is most common in conforming mortgages with loan-to-value ratios of 80 percent or less, according to real estate data firm CoreLogic. New York, New Jersey, and yes, Florida, are the states with the highest incidences of mortgage fraud.

Here are the most common types of mortgage fraud:

  • Income fraud: An applicant misrepresents the existence, continuance, source, or amount of their income (this has had the largest increase in the past 12 months at 22%).
  • Occupancy fraud: An applicant deliberately misstates the intended use of a property as a primary or secondary residence or an investment.
  • Transaction fraud: The applicant misrepresents the nature of the transaction, such as an undisclosed agreement between parties, falsified down payments, non-arm’s-length sale, or use of a straw buyer.
  • Property fraud: An applicant intentionally misrepresents information about the property or its value.
  • Undisclosed real estate debt: An applicant fails to disclose additional real estate debt or previous foreclosures.
  • Identity fraud: An applicant alters their identity or credit history, or uses a false identity.

In order to prevent mortgage fraud from occurring, make sure realistic expectations are set for both borrowing and homeownership. Be aware that there is numerous legislation at the local, state, and federal level designed to reduce mortgage fraud (particularly for investors and industry professionals). Real estate, title, and insurance agencies are licensed and monitored by government agencies, and many states also require periodic auditing of mortgage-lending companies' activities and transactions to monitor compliance. Knowledge is power, so keeping yourself informed of credible resources and what constitutes fraud is key.

For tips and insight into the South Florida real estate market, contact me at realtor@joannedwards.com.

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