What is Bank Fraud Mortgage?
Bank mortgage fraud is a transaction that is based on misinformation, partial information or omission of crucial information about a real estate, and which influences the decision of one or more parties to the transaction.
Different mortgage frauds schemes
There are different types of mortgage fraud schemes. These are discussed below in detail.
Foreclosure Rescue Scheme: A purporting investor targets those in foreclosure or who are likely to default a mortgage loan. The investor purports that he/she can save the owner from the coming risks by the owner having to transfer the deed or if the owner puts the property in the name of the fraudster.
The perpetrator then sells the property, getting profit. In this case, he/she will have used a fraudulent appraisal to create the said equity. He will also have denied sellers of the property to the original homeowner, of their fees and proceeds.
Sometimes, the homeowner is tricked into paying rent for some time and told they would buy back the property after their credit is settled. This is usually not the case and the property goes to foreclosure, because the perpetrator does not pay the mortgage payments.
Loan modification schemes: the perpetrator volunteers to engage the lender to renegotiate the loan in order to help the homeowner who are encountering difficulties in paying their mortgages and might lose the property. In addition to demanding for high payments, these people do not negotiate at all or end up striking unfavorable deals for their clients. Finally, the homeowner will lose the property.
Illegal property flipping: the perpetrator uses fraudulent appraisal information to fix the value of the property at a higher rate after buying it, and then sells it quickly. One or more ways might be employed to carry out this scheme. For instance, the income of the buyer might be inflated, loan documentation be false, and other tricks.
Builder bailout: in this type of scheme, builders try to offset losses out of their newly built homes by use of bailout schemes. The losses come because of increased inventory and in cases where the demand of their new property declining.
Sometimes, developers convert apartment complexes into condos after purchasing them in times of housing boom. Afterwards, these properties are sold to straw buyers in an inflated value. The developer does not disclose to the lender, the cash back incentives. In most cases, such buyers would not qualify to purchase the property, but the information about their assets and incomes is inflated to have them qualify.
Equity skimming: a mortgage loan is obtained by an investor in the name of the straw buyer. This is via use of false documentation. The rights of the property are thereafter transferred to the investor by the straw buyer.
Silent second: a second mortgage is secretly used to fund buying of the property.
Home equity conversion mortgage (HECM): in the related mortgage deal, a perpetrator will use a senior to obtain a property and then convert it to cash. He will then pay some money to the senior citizen, who is usually recruited through some means, for instance through churches and radio advertisements.
Commercial real estate loans: the appraisal value of the building is inflated as does the profitability. This is done by the home owners using bogus leases to finance the distressed property.
Air loans: in this case, the loan on property does not have collateral. Fraudulent information is used to fake applications, property and payment accounts.
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