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Mortgage Fraud

Mortgage Fraud Explained

Mortgage Fraud ExplainedMortgage fraud is a
criminal act that involves an individual misrepresenting themselves using
either false information and/or omitted information as a means of obtaining a
mortgage loan illegally.  There are many different methods that can be
utilized in order to perpetrate a mortgage scam. Some of these methods include:
occupancy fraud, income fraud, employment fraud, failure to disclose liabilities,
fraud for profit, appraisal fraud, schemes that claim cash-back, shotgunning,
or using identity theft as a way to receive a mortgage.

Mortgage fraud is considered to be a federal offense and can be tried in a
court of law. A report released by the FBI in 2004 claimed that mortgage crime
was on the rise and it would lead to definite financial crises. A second report
released by the FBI claimed that mortgage fraud  is one of the quickest
growing crimes in regards to white collar crimes in 2005. Annual reports also
state that nearly 4-6 billion dollars is lost yearly due to mortgage fraud. The
Fraud Enforcement Recovery Act of 2009 was established by the government in
order to enforce laws against cases of fraud especially in regards to a
financial institution.

The term “mortgage fraud” is commonly confused with the term
“predatory mortgage lending”. Predatory mortgage lending actually has
an adverse meaning and this involves the banks taking advantage or scamming the
borrower. Predatory mortgage fraud can also be referred to as a mortgage scam
but it is committed against the client.  In order to avoid mortgage scams,
it is important to read contracts carefully, never sign a document that
contains blank sections, do not allow a lender to strong arm you into borrowing
more money than can be afforded, and hire a trusted attorney to read over the

Penalties for committing mortgage fraud or a mortgage scam can take form as
steep fines in the amounts of several thousands of dollars, restitution, and usually
up to thirty years in prison. The penalties can be more if there is an
excessive amount in financial loss or personal loss.

Examples of Mortgage Fraud Explained

Examples of Mortgage Fraud ExplainedMortgage 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.

Fraud Enforcement and Recovery Act of 2009

Fraud Enforcement and Recovery Act of 2009

The Fraud Enforcement and Recovery Act of 2009 helps to enforce federal fraud law and to bring fraud charges against criminals especially when the act of fraud is committed against a financial institution. This act also helps to prevent mortgage fraud, security frauds, and commodity frauds.
The act was passed in the Senate on April 28, 2009. It was then passed in the United States House of Representatives on May 6, 2009. Finally, Barack Obama officially signed the bill into legislature on May 20, 2009. The act made it a felony to falsify documents or paperwork in an effort to secure financial properties in an accordance to fraud law.
The American Government Recovery Act of 2009 works with the Fraud Enforcement and Recovery Act to provide grants if a fraud law is violated and if the crime is committed on a grand scale against the US government.
The Fraud Enforcement and Recovery Act also provides funding to certain government enforcement agencies or affiliates in order to perform fraud investigations or to help promote detection of fraud in order to bring fraud charges against the criminal(s) involved. Some of these agencies include: the Department of Justice, US Postal Service, Office of the Inspector General at the United States Department of Housing and Urban Development, Secret Service, and the Securities and Exchange Commission.
Contained within the Fraud Enforcement and Recovery Act is the modified False Claims Act. The False Claims Act (otherwise know as "the Lincoln Law") allows an individual to come forward and report fraud charges regarding  any fraudulent act committed against the government. Another part of the Fraud Enforcement and Recovery act includes the Financial Crisis Inquiry Commission.
This section of the act states that the purpose of this commission is to examine the, "causes domestic and global of the current financial and economical crisis in the United States." The bill also extended the definition of "financial institution" to include mortgage lending businesses to enforce fraud laws upon these corporations as well.
This will also increase the likely-hood of fraud charges being brought against these companies in an effort to prevent such a violation against fraud laws. The act also enforces money laundering crimes to help better prosecute this violation of fraud crimes in a court of law.