When Mortgage Fraud Lurks Around the Corner

Dec 29, 2008

The latest crime to hit the papers is mortgage fraud and there is no question it is on the rise.

Since 2005 this crime increased by a rough average of 13% per year, an astonishing figure and one the Federal Bureau of Investigation isn’t thrilled to report. It’s the latest form of white-collar crime invented by people wanting to make a quick buck at the expense of others.

Now you might be thinking that no one could scam you out of your mortgage because the people you are dealing with are professionals who know their business and wouldn’t risk their reputations to do something like that. Think again. This is a far more common crime than you make think, and it’s generally committed by those with the most knowledge of how to get away with it.

There are a variety of types of mortgage fraud and there are even instances where it’s committed and the people doing it didn’t even know that they messed up. Ok, this is relatively rare, as most instances involve people fully cognizant of what they are doing.

What is difficult about this area of crime is the vast array of ways mortgage fraud takes place. For instance the top form of fraud is property flipping. This is where a person purchases a property, gets it appraised right away for a higher price (the appraiser is in on the deal for a cut), then sells at a profit. Fraud may also mean using a stolen identity on a loan application or something as simple as lying on the application.

In today’s off the rails mortgage market and ensuing recession, scamming is even easier, as there are too many cooks stirring the pot from start to finish in this process. It could all start with a white lie on the application, or a homeowner pulling a fast one by working with an appraiser to overvalue the property to sell it later to make a fast buck.

Don’t forget that real estate agents are usually involved in sales transactions and they may also be in the market to make a little cash on the side. The simple addition of an extra $60 fee into the home price may not seem like much, however if that same agent sells 30 homes a month that’s an extra $1,800.

How do you know who is scamming you and who isn’t? Good question and the answer is likely slightly depressing because you don’t really know who is scamming you or not – not without the help of a qualified lawyer who will monitor your mortgage agreements and thanks to his or her training will catch a scam.

Are there things you may do to reduce the chances of being scammed? Yes, do your homework if you are planning to buy a house. Know the prices in your area for homes that have already sold. Compare them to the house or homes you are interested in. If the price is too high either start asking a lot of very pointed questions, or run like crazy in the opposite direction.

Check the licensed professionals you are working with, as in check to see if they are licensed to practice in your area. And yes, this includes checking to see if your lawyer is a recognized member of the bar in your state. Make a trip to the local land titles office to find out the history of the house you are interested in buying. If it’s been bought and sold quickly and the price was pretty high, it’s a safe bet the house has been flipped for profit.

Honestly, if you are buying a house and it sounds too good to be true, then it IS too good to be true and avoid it like the plague. Pay attention to what you are doing and to what real estate agents and others are doing when it comes to your mortgage. No one said you have to be a totally savvy mortgage broker to beware of things that don’t seem right. Keep in mind that consulting a lawyer with extensive expertise will lessen your chances of being involved in a mortgage scam.

If you’re thinking this could never happen to you, think again. It can and it does happen to anyone. All it takes is one simple lie to start the ball rolling and the deed is done. Ironically this used to be a fairly rare white-collar crime, but now it’s everywhere. In fact (and these states aren’t exactly bragging about this) the top three states where mortgage fraud is right out of hand are, Michigan, California and Florida.

Daniel Wannamaker is a board certified criminal law specialist and has 24 years of criminal trial experience with proven results as a Dallas criminal defense lawyer practicing in Austin criminal defense and Houston Texas. To learn more, visit https://www.wannamakerlaw.com.

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