Red Flags and Mortgage Fraud

Due to the popular refinancing boom of the last few years, mortgage fraud has been on the rise. Unfortunately, borrowers tend to be the victims of the offense. The parties involved in mortgage fraud may include mortgage companies, mortgage brokers, appraisers, or borrowers.

In order to avoid becoming a victim of mortgage fraud, the borrower should keep in mind numerous things. There are certain issues or types of conduct that should raise a red flag to the borrower. If any of the below-mentioned types of conduct occurs, the borrower should be alerted to the potential of mortgage fraud. Some of the types of conduct include:

  • The borrower was induced or encouraged to make false statements on a mortgage application.
  • The borrower was asked to leave a signature line or other line containing pertinent information blank.
  • The mortgage broker or mortgage company altered or changed information on the application or mortgage documentation.
  • The mortgage broker or mortgage company removed a disclosure from the loan package.
  • After refinancing, the borrower's payment actually increased instead of decreased.
  • Assessment of daily interest for a late payment to the borrower.
  • The loan amount to the borrower was higher than the value of borrower's home.
  • The borrower incurred unexpected costs or fees at the settlement phase of the mortgage process.
  • The borrower's monthly payments were higher than any amount listed on the disclosures during the settlement.
  • The borrower was required to purchase credit insurance. The borrower may opt to purchase such insurance, but should not be forced or required to purchase credit insurance as a condition of obtaining a mortgage.

If the borrower suspects that he or she is the victim of mortgage fraud, the borrower should contact the attorney general's office in his or her state. The borrower should attempt to document all of the suspicious conduct by the mortgage broker or mortgage company.

The attorney general will determine whether there is enough evidence to bring charges for mortgage fraud against the mortgage broker, mortgage company, an agent, or all three parties.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.