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What Is Mortgage Fraud?
Mortgage fraud can be done deliberately, with the intention of misleading authorities, banks, and lenders, or it might be done by someone not aware of the legalities of certain actions, such as renting out a property you bought for your own use.
Often, the victims of mortgage fraud are first-time buyers who don’t have the experience of such transactions and can easily fall into the trap of a fraud. Below you will find three of the most common frauds first-time homebuyers should be aware of.
Types of Mortgage Fraud
1. Occupancy Fraud
One of the most common types of mortgage fraud is occupancy fraud, when a borrower misleads a lender into allowing a bigger loan, or a lower interest rate, by stating that they will occupy the building. Instead, the borrower uses the fraud to gain profit from the property, renting it out to third parties.
2. Flipping Scheme Fraud
House flipping is a commonly known thing, and some companies or individuals are dedicated to actually improving homes and reselling them for a higher price since they added value to it. The flipping scheme involves buying a house below market value, getting it evaluated by a corrupt appraiser, and reselling it for a higher price, but in the same condition it was.
3. Appraisal Fraud
Similar to a flipping scheme fraud, appraisal fraud involves corrupt appraisal officers. These officers are responsible for evaluating homes and certifying their value on the market. It’s obvious that an appraiser who has an unethical interest that goes beyond their job will have the possibility to change the price of a property in order to gain money from a bigger commission, or by decreasing its value so that it’s purchased by an investor involved in the scheme.
How to Combat Fraud
As a first-time home-buyer, it’s stressful to make such a big decision anyway, let alone in the context of possible fraud schemes.
To Conclude
As first-time buyers, you need the guarantee that your real estate agent and mortgage professional work for your benefit, can be trusted and have certifications. Always verify who you are working with and report the case if you suspect being the victim of fraud.
Contact us at CSMC Mortgage if you need a legit, experienced and favorable mortgage professional.