The Federal Mortgage Fraud Task Force is looking for crooked mortgage brokers, dishonest real estate brokers, and cheating homebuyers and real estate investors. While most people play it straight and narrow, good deeds can be mistaken for bad. Stay out of the mortgage fraud spotlight using a few simple techniques!

In today’s home buying climate, deals are hot, financing is hot, and buyers are in trouble. The buyers?

Yes. If they can get the loan, they can take advantage of some great deals. The question is, can they get the loan? Some buyers want financing so badly that they are willing to crunch the numbers or take shortcuts to get there. Sometimes it doesn’t even take that. In general, you have committed mortgage fraud if:

  • He withdrew cash from the bank and paid off the debt without telling the lender;
  • You bought a car before your loan closed and you didn’t tell the lender;
  • You are receiving credit for anything at closing and you did not tell the lender;
  • makes any agreement that is not known to the lender at the time of closing, usually called a “side agreement”;
  • An adjustment you make at closing is not reflected in the HUD-1 settlement statement;
  • Part of your down payment or closing costs comes from the work you will do on the property;
  • For bond loans, if you get a substantial INCREASE.
  • Any part of the down payment is borrowed;
  • You have had a significant job change, quit your job, or started a new job without telling the lender;
  • You do not move into the property when you certify to the lender that you will be an owner-occupant;

The Real Estate Settlement Procedures Act (RESPA) is very specific about how a closing must proceed,

especially one that is subject to financing.

Mortgage fraud is easy to fall into and hard to get out of. Even judges have fallen for it. For example, in Tampa, Florida, Judge Thomas E. Stringer pleaded guilty on August 6, 2009, to bank fraud. He was helping a young ballerina “protect” her property. In the process, he bought her a house in Hawaii. Things turned sour with the disreputable dancer and the deal was reported. Judge Stringer had not been completely honest in his loan application. He did not disclose that he had borrowed all or part of the down payment. That’s a big “no no!”

Judge Stringer’s case represents the proposition that it is not necessary to foreclose on a mortgage to commit fraud. He was current on his loan payments. That was not the problem. His only mistake was not telling his lender that he had borrowed the down payment. The lender reported no losses!

In the simplest terms, any statement made to the lender that is not 100% accurate can be considered fraudulent. Any change in the borrower’s financial health, such as buying a car or incurring additional medical bills without notifying the lender, may be fraudulent. Any decrease and, in some cases, any increase in income without notifying the lender may be fraudulent. For example, some loans are aimed at low-income buyers. If the borrower makes too much money, he will not qualify. What do you do if before you close you get a big raise? You better reveal the fact!

The HUD-1 settlement statement lists all charges and all credits in your sale. If the money changes hands and is not on the settlement statement, fraud may have occurred. For example, what happens if the buyer discovers that the picture window in the front room was broken the night before closing. It’s going to cost me $600 to fix it. The seller agrees to pay. If you write a check to the buyer at closing to ‘keep things simple’, fraud is likely to be committed. The window repair should be on the bill, as should every penny spent.

Another fraud trap that is easy to fall into is representations made by the buyer in other loan documents. Do you plan to occupy the property? If you answer “yes,” you better have a good excuse for why you didn’t if you’re not fat and cheeky in the house a year later.

But what if you get a last minute job transfer or change in life circumstances? Do you have to live in the house alone to settle the potential fraud charge? Of course not! The question is what your intentions were when you signed the loan documents. If he said he was going to move into the property but got a job transfer 2 days after closing, then he has complied with the intent part of the law. You planned to live in the house when you bought it. As fate has it, a job transfer to another city 2 days later prevents living in the house. Without cheats

Demonstrating your intent is not always as easy as it seems. Let’s say he bought a house, closed on it, and then his dream home comes on the market two blocks away. The price is too good to pass up. Can you live in the new house or do you have to live in the old one?

This is a more difficult argument to present to an investigator since it is difficult to prove your intentions. Should you buy the second home and take the chance? Assuming you’ve documented your path, why not buy the second home? However, if you do that 13 times over a period of a few years, as happened recently in Colorado, you’re probably in trouble. As a general rule, if you don’t live in the house after the first year, even though you certified that you were going to live in the house, make sure you have your paperwork ready! You could easily get a call on the mat as occupancy is verified for many loans.

Unfortunately, everyone in the real estate business chain, from the loan originator to the closing agent and brokers and attorneys in between, are potential fraudulent actors. For example, if the figures at closing are significantly different from the rates you are charged at the time of settlement, then you may be a victim of loan fraud. Keep an eye out for fixes and changes where sellers are making a big profit on the house. In these cases, you’ll want to double-check comparable parables and maybe even hire another appraisal company to verify true market value. One has to wonder how a house that was worth $400,000 a month ago is now worth the $550,000 you agreed to pay for it. There may be valuation games with the property.

The easiest way to get caught by the http://www.mortgagefraudtaskforce.com/ Task Force is through a foreclosure. Properties that go on the auction block are frequently examined to see if the underlying loan was legitimate. However, as in the case of Judge Stinger, you don’t have to be discouraged to get free room and board at crime school. Let’s hope those who end up in prison for their illegal activities don’t get away with a new fraud scheme!