Mortgage fraud can be
executed in a variety of ways. Some of these fraudulent methods include:
Occupancy Fraud: When a buyer claims that he/she plans on using the home as their primary place of residency or as a second home when in fact they plan on renting it out to other occupants. They lie about this claim in order to obtain a lower interest rate on their mortgage loan.
Income Fraud: The borrower claims to make more than he/she actually does in
order to receive a larger loan. Many times, the borrower will provide fake or
forged bank account statements or W-2s in order to better execute this method
of mortgage fraud.
Employments Fraud: This type of fraud happens when the borrower claims to have a high ranking position at a company, self-employment, or a position at a company that does not exist in order to secure a loan.
Failure to Disclose Liabilities: This method of mortgage fraud is when the borrower leaves out existing liabilities that have against them (i.e. credit card debt, existing loans, etc.) to make themselves appear more eligible to receive a mortgage loan.
Fraud for Profit: This is an example of mortgage fraud that is well thought-out and involves multiple people to execute it. It involves fake appraisers, borrowers, etc. under false aliases to tell a mortgage company they need to take a loan to purchase a house. These criminals take out the loan then rent the house out to renters without paying back the mortgage loan or making necessary repairs on the home. Many times these criminals are always on the move and will relocate to commit the same scheme under a different guise.
Appraisal Fraud: This occurs when the borrower falsely and purposely claims that their home is worth more or less than the actual appraisal value. They can say their home is worth less in an effort to pay less than they should on their mortgage loan payments or worth more in order to purchase property in order to sell the house and keep the remaining balance or in order to commit a fraud for profit scheme.
Cash-Back Schemes: Appraisal fraud is directly linked to this scheme in that it involves illegally increasing the price of a home so the borrower can claim a rebate and pocket the extra money.
Shotgunning: Involves the criminal to take out more than one loan on the same house. The value of the loans end up being more than the value of the house making it hard to force the criminals into paying back all of the loans.
Identity theft: Identity theft allows the borrower to purchase a home under a different identity. This forces the victim of the identity theft to incur the financial balances of the property and it can destroy their credit.