Grand Rapids home bargains -
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Mortgage Fraud is the material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. There are a number of ways this activity can happen, but the following are the most common:
The homebuyer allegedly borrows the down payment from the seller by means of a second mortgage; however, the seller releases the second mortgage immediately after the closing without the primary lender's knowledge. The primary lender is often referred to as the underwriter of the loan. The information regarding the second mortgage does not appear on the HUD closing statement. This scheme requires an inflated appraisal and is utilized by a buyer who needs 100% financing without paying the additional costs normally associated with such loans.
The homebuyer borrows the down payment from the seller by way of a second mortgage, but this fact is not disclosed to the lender. The lender then approves the loan, believing that the buyer invested his/her own funds because the purchase agreement states that he/she has paid the amount of the second mortgage to the seller in full. In many instances, the second mortgage is not recorded so as to insure that the information is permanently concealed from the lender. In these situations, the buyer will make two monthly payments, one to the lender and one to the seller.
Equity skimming often begins with a straw buyer. A straw buyer is a financially qualified person who is convinced to purchase a property on someone else's behalf, usually because the other person (the perpetrator) does not want his/her name to appear on the deed and mortgage. The perpetrator recruits the straw buyer by promising to pay him/her a fee and assume responsibility for the mortgage payments. After the closing, the straw buyer deeds the property to the perpetrator, but he/she does not record the deed. The perpetrator then rents the property and collects the rental payments, but does not make the mortgage payments. The property eventually goes into foreclosure. In another variation, the perpetrator steals an individual?s identity and applies for a mortgage in that person's name. Once the loan has closed, the result is the same: the perpetrator rents the property and collects rental payments, but does not make the mortgage payments and the property ends up in foreclosure.
The perpetrator identifies a homeowner who is at risk of defaulting on a mortgage or whose home is already in foreclosure. The perpetrator then misleads the owner into believing that the perpetrator can prevent the owner from losing the home. One variation of this scheme defrauds the homeowner without defrauding the lender. In this instance, the perpetrator convinces the homeowner to sign a form that supposedly authorizes the perpetrator to contact the lender on the owner's behalf. In reality, the form is a deed transferring the property's title to the perpetrator. The perpetrator then pays off the mortgage, evicts the owner, resells the home, and pockets the equity. A second variation defrauds both the homeowner and the lender. With this scheme, the perpetrator charges the homeowner an upfront fee that supposedly will pay for the perpetrator's services. The perpetrator simply pockets this fee without doing anything, and the homeowner ultimately loses the home to foreclosure.
Most mortgage fraud schemes could not be carried out without an inflated appraisal. An appraisal tells lenders, brokers, and buyers whether or not a home is a sound investment, and the estimates used to create the appraisal rely to some degree upon the appraiser's subjective evaluation of the property and market conditions. Appraisal fraud occurs when, rather than conducting an independent estimate of a home?s value, the appraiser is asked to base their estimate on a predetermined value, which is typically the number needed to make the loan successful. Inflated appraisals have long-term consequences for the homeowner. Often, homeowners risk financial ruin because the inflated appraisal has caused them to borrow more than their home is actually worth. As a result, when they attempt to sell their home, they are forced to come up with the difference at the closing table.
A misrepresentation that the buyer intends to occupy the property in order to qualify for a reduced interest rate and lesser closing costs.
It is acceptable to buy a property and sell it quickly for a profit. This practice can become illegal when a property is purchased for fair market value or less and, with the help of an inflated appraisal, is quickly sold to an unsuspecting buyer for an inflated price. In most instances, the perpetrators set up the "flip" transaction before having closed on the initial purchase, which means the flip can occur on the same day the perpetrator actually purchases the property.