What Is Mortgage Fraud For Profit

What Is Mortgage Fraud For Profit



What is​ Mortgage Fraud For Profit?
The Story:
In 2018,​ Sally was having trouble keeping up with her mortgage payments,​ and by September,​ she received a​ foreclosure notice in​ the​ mail .​
a​ few days later,​ she was called by a​ man who said he could help .​
He said she could have a​ check for $40,​000 to​ help pay her bills,​ and she wouldn’t have to​ worry about foreclosure any more .​
Sally signed papers in​ late October at​ a​ title company in​ Maryland .​
She went home with a​ $40,​000 check and started making her new house payments to​ District Properties in​ December .​
Nine months later,​ Sally started having trouble making her house payments again .​
This time,​ instead of​ a​ foreclosure letter,​ she received an​ eviction letter in​ the​ mail .​
Sally gradually realized that she no longer owned her home; she was simply a​ renter .​
In a​ panic,​ Sally called District Properties .​
The man who answered the​ phone told her that Subprime Mortgage Co .​
held two loans against the​ house,​ one for $264,​000 and one for $66,​000,​ but she could buy her house back for $360,​000 – three times the​ mortgage she had a​ year earlier .​
Sally’s income and credit were not good enough to​ buy her house at​ that price .​
The man said,​ I’m sorry and hung up.
The Profile:
Like hundreds of​ District residents,​ Sally became a​ victim of​ mortgage fraud for profit,​ sometimes called equity skimming .​
The scheme she fell victim to​ was orchestrated by a​ variety of​ people,​ including a​ mortgage broker,​ real estate agent,​ appraiser,​ investor,​ straw buyer,​ and bird dog .​
Each person in​ the​ scheme received a​ portion of​ the​ equity in​ Sally’s house .​
In the​ end,​ Sally lost her house,​ Subprime Mortgage Co .​
foreclosed,​ and the​ group that orchestrated the​ fraud made more than $100,​000.
This fraud is​ different from predatory lending,​ in​ part because Sally never made a​ loan .​
Predatory lending typically involves a​ single loan with extremely high fees and a​ high interest rate made to​ a​ homeowner or​ legitimate purchaser .​
Mortgage fraud for profit is​ typically a​ more complex scheme involving an​ inflated appraisal,​ falsified loan applications,​ equity skimming,​ property flipping,​ and sometimes identity theft .​
The borrower is​ typically a​ straw buyer,​ who never intends to​ occupy the​ house .​
The mortgage payment is​ paid by the​ investor,​ or​ a​ company controlled by the​ investor .​
Eventually,​ the​ investor stops making mortgage payments,​ forcing the​ lender to​ foreclose,​ or​ sells (flips) the​ house for additional profit .​
In a​ typical mortgage fraud for profit scheme,​ a​ bird dog looks for distressed houses by checking public real estate records and driving around targeted neighborhoods .​
When a​ house is​ identified,​ the​ bird dog reports the​ address to​ the​ investor and receives $1,​000 or​ so for the​ service .​
a​ straw buyer,​ who is​ a​ person with good credit or​ a​ falsely inflated credit score,​ poses as​ a​ buyer .​
In some cases,​ a​ straw buyer is​ a​ stolen identity; the​ person whose name is​ stolen may discover the​ theft when credit is​ denied or​ the​ purchase appears on​ a​ credit report .​
In some cases,​ a​ straw buyer is​ a​ participant in​ the​ scheme – a​ professional straw buyer .​
In many cases,​ however,​ a​ straw buyer is​ a​ person who hears by word of​ mouth through family,​ friends or​ co-workers that someone will pay $5,​000 to​ $10,​000 for the​ use of​ his or​ her name .​
As with most financial arrangements that seem too good to​ be true,​ a​ one-time straw buyer often finds that things do go wrong: his credit may be ruined because the​ mortgages are not paid,​ he may be investigated by law-enforcement for fraud,​ or​ he may be charged with conspiracy.
In addition to​ bird dogs and straw buyers,​ a​ mortgage broker and appraiser are important participants in​ a​ mortgage fraud for profit .​
Usually,​ both are active participants in​ the​ scheme and receive money for falsifying documents .​
Other industry professionals who play an​ important role are employees of​ a​ title company who create closing documents and disburse funds after a​ sale is​ completed .​
Professionals who have access to​ credit report databases or​ software that generates W-2 forms and pay stubs also participate in​ the​ scheme .​
As reported in​ the​ 2018 FBI Financial Crimes Report,​ 80 percent of​ all reported mortgage fraud losses involve industry insiders .​
Perhaps this is​ why mortgage fraud for profit has become so prevalent throughout the​ country .​
a​ homeowner facing foreclosure is​ easily convinced by a​ professional mortgage broker,​ for example,​ that he should sign contracts that convey his house to​ someone else .​
People tend to​ trust professionals in​ the​ financial industry .​
This is​ one of​ the​ reasons that government regulations requiring financial industry professionals to​ maintain specific standards are so crucial for the​ protection of​ consumers.




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