- Mortgage fraud is when information is falsified or withheld during the application process to manipulate the loan’s terms or a bank’s decision to approve it.
- Both borrowers and homeowners can commit mortgage fraud — or they can be victims of it.
- Scams targeting homeowners facing foreclosure are some of the most common types of mortgage fraud.
Mortgage fraud is a serious offense, and it’s one that borrowers and homeowners can both commit and be victims of.
When fraud is committed by mortgage borrowers, it’s often because they wanted to buy a home but believe their finances would prevent them from getting approval. Things like lying on your mortgage application or misrepresenting your income are considered mortgage fraud and come with serious legal repercussions.
But borrowers and homeowners can also be victims of fraudsters looking to profit off of individuals going through a confusing or stressful process. Homeowners who are behind on their mortgage payments or are facing foreclosure are especially vulnerable, as some of the most common mortgage fraud schemes target distressed homeowners.
What is mortgage fraud?
Mortgage fraud involves providing false or deceptive information to a lender in order to obtain mortgage approval. The FBI defines mortgage fraud as “a lie that influences a bank’s decision.” Scams that target homeowners facing foreclosure also fit the FBI’s definition of mortgage fraud.
How is mortgage fraud detected?
With rising mortgage rates and high home prices, buying a home has become less affordable. “Historically, fraud becomes a bigger issue for the mortgage industry during times of strong or weak mortgage application activity,” says Nick Larson, senior director of strategy and business development at LexisNexis Risk Solutions. “This can tempt consumers to falsify income, liabilities, and occupancy in order to improve the chances of securing a higher-dollar mortgage.”
Financial institutions monitor for signs of fraudulent activity by carefully verifying all the information they receive from applicants.
Stricter underwriting processes and advances in technology have made it more difficult for loan applicants to get away with submitting false information. For example,
typically verify the information you provide about your income by requesting your tax transcript directly from the IRS. Some lenders also have the ability to pull information about your assets directly from your bank with your permission.
Lenders will also look for suspicious activity related to the specific transaction. For example, if you’re buying a house to be used as your primary residence that’s …….