7 Examples of Mortgage Fraud

May 31, 2024

Mortgage fraud is a crime that involves intentionally misrepresenting information on a mortgage loan application to obtain financing that would otherwise be unavailable. Here is a list from a team of white-collar crime lawyers of some common types of mortgage fraud schemes and their potential impact.

White-Collar Crime Lawyers Share 7 Examples of Mortgage Fraud

1. Inflated Appraisals

Appraisal fraud occurs when the value of a property is deliberately overstated to secure a larger loan amount. This may involve collusion between the appraiser, borrower, or other parties involved in the transaction. Inflated appraisals can lead to borrowers being burdened with excessive debt and lenders facing significant losses if the borrower defaults.

2. Income Falsification

Income falsification is a prevalent form of mortgage fraud where borrowers misrepresent their income or employment status. This can include providing fake pay stubs, tax returns, or employment verification documents.

The goal is to qualify for a larger loan than they would otherwise be eligible for based on their actual income. This deception not only puts lenders at risk but can also lead to financial hardship for borrowers who may struggle to keep up with inflated mortgage payments.

3. Occupancy Fraud

Occupancy fraud takes place when borrowers falsely claim they will occupy a property as their primary residence when they intend to use it as an investment property or rental. This deception allows them to secure more favorable loan terms, such as lower interest rates and down payment requirements.

However, this misrepresentation can lead to higher default rates, as investment properties are statistically more likely to go into foreclosure than owner-occupied homes.

4. Straw Buyers

Straw buyers are individuals who agree to use their name and credit history to apply for a mortgage on behalf of someone else. This scheme is often used by those with poor credit or who are trying to conceal their identity from lenders.

Straw buyers may receive compensation for their participation, but they ultimately assume the risk of default. If the loan goes into default, the straw buyer's credit will be severely damaged, making it difficult for them to obtain future loans or credit.

5. Equity Skimming

Equity skimming targets homeowners who are struggling to make their mortgage payments. Fraudsters offer to take over the mortgage in exchange for a fee or a share of the equity. However, they often fail to make payments, leading to foreclosure and the loss of the homeowner's equity. In addition, scammers may steal the down payment or closing costs from the homeowner. If you have been accused of equity skimming, check out this site.

6. Property Flipping Fraud

Property flipping fraud involves purchasing a property, inflating its value through fraudulent appraisals or renovations, and then quickly reselling it at a much higher price. This scheme often involves multiple parties working together to deceive lenders and buyers. These schemes can lead to significant financial losses for buyers who unknowingly purchase overpriced properties based on false valuations.

7. Foreclosure Rescue Scams

Foreclosure rescue scams prey on vulnerable homeowners facing foreclosure. Scammers promise to help them save their homes, but often charge exorbitant fees and fail to deliver on their promises. These scams can result in homeowners losing their homes and any remaining equity. Additionally, some scammers may convince homeowners to sign over the deed to their property, leaving them with no legal recourse.

Mortgage fraud is a multifaceted issue with severe consequences for both individuals and the financial system as a whole. If you've been accused, don't let the grass grow under your feet. Get legal help immediately to defend your future and reputation.


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