Florida was recently ranked in a Core-Logic report as one of top three states in the country with a mortgage fraud risk. The other two states in the country with particularly high mortgage fraud rates include New Jersey and New York. Also according to the report, the risk of fraud in 2018 rose 10% as compared to 2017. In this current climate, Florida lenders must be particularly careful and proactive in preventing mortgage fraud. It helps to understand some of the important details about how mortgage fraud occurs so that it can be more easily recognized. It is also important to remember that if you are involved in a real estate transaction involving mortgage fraud, you should not hesitate to obtain the assistance of an experienced real estate attorney who can make sure that your case resolves in the best possible manner.
Two Types of Mortgage Fraud
There are two types of mortgage fraud, which include the following:
- Fraud for housing. This type of fraud is committed when a borrower misrepresents information on a loan application, which can include details about a person’s assets, employment, or income.
- Fraud for profit. Fraudulent acts of this nature are a more complex process and involve industry insiders who attempt to defraud lenders to gain profit.
Each of the mortgage schemes that are outlined below fall into one of these two categories.
Common Types of Mortgage Schemes
Some of the most common types of mortgage schemes include the following:
- Air loans. These loans involve non-existent buyers who take out loans for non-existent properties. When default occurs because there is not any physical residence to foreclose on, it is impossible for a lender to recoup loss.
- Buy and bail. This type of fraudulent act occurs when a homeowner is up to date with payments on their existing mortgage, but applies to purchase another home. After the mortgage on the new home has been secured, the borrower allows the first home to go into foreclosure.
- Foreclosure rescue. This process involves fraudulent conveying homeowners who are faced with foreclosure that you will pay off a mortgage for a fee. In reality, the mortgage is not ever paid off.
- Property flips. This type of fraudulent act occurs when a property purchased and later resold at an artificially higher price.
- Straw borrowers. These schemes involve real individuals, but they are not the actual borrowers. Instead, this real person acts as a “straw man” to obtain the mortgage. Many times, the loans go into default early on in the payment of the mortgage.
Contact an Experienced Real Estate Lawyer Today
As can be seen, there are a number of ways in which mortgage fraud can occur. If you end up in a real estate transaction in which fraud is involved, you should immediately contact an experienced attorney. At Adam Law Group, we have helped numerous individuals navigate complicated real estate issues and know what it takes to make certain that your case resolves in the best possible manner. Contact our law office today to schedule an initial free consultation.