The intention of mortgage fraud is typically to receive a larger loan amount than would have been permitted if the application had been made honestly. For example, by intentionally falsifying information on a mortgage application. Mortgage fraud schemes include straw buying, air loans, and double-sales.
In addition to individuals committing mortgage fraud, large scale mortgage fraud schemes are not uncommon. In 2008, the U.S. Department of Justice and Federal Bureau of Investigation (FBI) initiated “Operation Malicious Mortgage” as a special operation to investigate and prosecute 144 cases of mortgage fraud. Penalties for mortgage fraud include fines, restitution and prison time with sentences of 28 months on average. There are two distinct areas of mortgage fraud.
Perpetrators of this type of fraud are often industry insiders using their specialized knowledge or authority. These insiders include bank officers, appraisers, mortgage brokers, attorneys, loan originators, and other professionals engaged in the mortgage industry. Fraud for profit aims not to secure housing, but rather to misuse the mortgage lending process to steal cash and equity from lenders or homeowners. The FBI prioritizes fraud for profit cases.
This type of fraud is typically represented by illegal actions taken by a borrower motivated to acquire or maintain ownership of a house. For example, the borrower may misrepresent income and asset information on a loan application or entice an appraiser to manipulate a property’s appraised value.
Mortgage fraud is a financial crime that entrails the falsifying of loan documents, or otherwise trying to illegally profit from the mortgage loan process. The FBI considers fraud to be a material misstatement, misrepresentation or omission in relation to a mortgage loan which is then relied upon by a lender.
A lie that influences a bank’s decision—for example, about whether to approve a loan, accept a reduced payoff amount, or agree to certain repayment terms—is mortgage fraud. The FBI and other enforcement agencies charged with investigating mortgage fraud, particularly in the wake of the 2008 housing market collapse, have broadened the definition to include fraud targeting distressed homeowners.
Aside from lying on a loan application, other types of mortgage fraud include:
Article Source: investopedia.com
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