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Mortgage Fraud Prevention

Mortgage Fraud is any procedures to acquire mortgage with false information. The objective of this article is to detect a mortgage fraud at early stage for prevention. Mortgage Fraud increased gradually recently. It is believe to be around in trillion dollars per year in US and Canada.

Most of us dreams to own a house or home. In the process, we sometimes go over board. The fraudster misrepresents information like employment, status, tax, and other obligation just to obtain a house or home. Some fraudster misrepresents for profit too.

A quick flip an ownership is an obvious signs of fraud. For example, the fraudster buys a house. The fraudster gets a house appraisal with an inflated house price. A straw man who is unconnected to the fraudster purchases the house at an inflated house price. So, the fraudster earns a huge profit. Usually, the fraudster finds a straw man and promises easy money. Often, the straw man is a victim. In the meantime, the fraudster may or defaults on monthly mortgage payment. In case of default, the mortgage lender forecloses the house. Even though the fraudster loses the house, the fraudster earns a profit from the sale of house to the straw man.

Now, mortgage lenders keep a close eye on any property that is sold within ninety days of ownership. This is to combat the last example. Furthermore, some mortgage lender disapproves any purchase within ninety days of ownership.

Common Mortgage Fraud

- inflate appraisal value of property to sell at higher price
- bogus home upgrades or renovations
- misrepresentation of information on mortgage application
- use fake documents and identification
- unpaid mortgage, insurance, property tax, and home owner association in behalf of new owner
- flip property ownership to straw man
- fake down payment by the borrower

Mortgage Fraud Prevention Tips

Match the signature to the first and last name of the borrower if you can make out the first and last name from the signatures. If the signature does not match the first and last name, you can raise the fraud alarm.

We often forget that the telephone can be handy. The phone directory verifies the identity of the borrower at times. Also, you can verify the employment and identification by telephone.

With the advancement of technology, the fake documents are often hard to distinguish. A simple way to detect fake bank statement is to match the balance on previous statement to the next statement. Also, you can match the paycheck amount with the bank deposit amount.

There is fraud detection software available in the market. The software validates the information on the form. And, the software detects any inconsistencies at the early stage of the mortgage application. Today, the softwares are highly sophisticated and surprisingly user-friendly.

Mortgage Fraud evolves as we strengthen our mortgage fraud prevention tools. In the future, a new nature of mortgage can rise at any time. We must feel free to question unusual and suspicious activities. As a borrower, you may want to use a reputable business entity. At least, you must investigate the history of the business entity before you do any financial transaction. It may be more costly, but it gives you peace of mind. Or, you could end to lose your house.


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Information and calculation provided on this mortgage calculators website is for general purposes only. It is not intended to take the place of advice from your mortgage brokers.