Crimes related to mortgage fraud

Mortgage fraud is an extensive term applied to delineate a diverse range of activities. These activities are carried out for the aim of falsifying or skipping some essential details in an application for the purpose of financing, insuring or buying a mortgage loan.

The expression “mortgage fraud” must not be mixed up with predatory mortgage lending. A fraud takes place if a person tries to swindle a financial institution. Predatory lending practice is an expression applied to denote the malevolent operations performed by a financial institution for the intention of deceiving or betraying a consumer.

In the U.S., a number of mortgage cases have been filed by the debtors against creditors and vice versa. Certain amendments on mortgage laws are being contemplated by the federal government to restrict mortgage frauds.

Examples of mortgage fraud

Following are few instances of mortgage frauds:

Occupancy fraud: Usually, the lenders ask for higher rates of interest on properties which are uninhabited by the proprietors and are bought for investing purposes. For availing mortgage loans at reduced rates, the borrowers try to deceive the financial institution by stating that they are the primary inhabitants.

Income/employment fraud: For the intention of acquiring a greater loan amount, the borrowers have a propensity to exaggerate their level of income. These frauds are known as liar loans and they take place at times when no verification of the borrower’s income level is done by the lending company. An example of this kind of fraud is the alteration done by the borrower in his income statement form, which has been supplied by his employer. One more prominent example of a liar loan is the income claim placed by a self-employed person; however no records are there to verify the borrower’s income claim.

Appraisal fraud: Here the person who is borrowing the money goes into an agreement with the evaluator or appraiser and exaggerates the appraised value of the property. The borrower commits this fraud to receive greater loan amount           as cash-out refinance. These frauds are carried out by property vendors for the intent of receiving higher price at the time of a buying transaction.

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