When people think of mortgage fraud, they often think of fraud for profit. Certainly, mortgage fraud conducted to make money can be particularly ruthless.
For example, an individual seeking to defraud a bank could create a completely artificial property and submit falsified documents, tricking a lender into remitting funds for a transaction that never occurred. When they fail to start making payments, the lender goes to foreclose on the property, only to suddenly discover that the property doesn’t exist or has a different owner and a mortgage already attached to it.
The most common kinds of mortgage fraud often don’t occur for profit but instead for housing. Those who want to buy real estate can put themselves at risk of prosecution when they lie about their situation.
People don’t realize how dangerous lying can be
You know that you would do everything in your power to make sure you pay your mortgage regardless of what else happens in your life. You could lose your job, and you know that you would go out and find scrap metal to make sure you pay your mortgage every month.
Lenders have no way of knowing how motivated a person is, which is why they rely on credit scores and employment records when making financial decisions. Prospective borrowers sometimes go to extreme lengths in their attempts to inflate their income and convince a lender to lend them money that they otherwise would not or increase the amount of the mortgage.
From setting up fake phone numbers to field employment verification calls to falsifying financial statements, there are many ways that prospective home buyers may misrepresent their circumstances and therefore commit mortgage fraud. Fraud for housing may not cost companies as much in as dramatic of a fashion as fraud for profit, but it will still put the company at a financial disadvantage.
You don’t have to default to face prosecution
One thing people often fail to understand about mortgage fraud is that they don’t have to lose their homes to be at risk of prosecution. If the lender uncovers the issue later, you could be held responsible for the lies you made on that mortgage application even when the loan itself is still in good standing.
Some people come up with schemes to improve their chance of getting a mortgage on their own, while others have support or advice from a real estate professional or a mortgage broker. Identifying what behaviors can constitute mortgage fraud could help you avoid a mistake that could lead to jail time or major financial penalties when all you wanted was to buy a new home.