Between 2021 and 2023, reports of mortgage fraud increased by 37%, according to the FBI. Experts believe that this spike in fraud is the result of an economic downturn. Mortgage fraud is, quite simply, and misrepresentation or dishonesty designed to trick homeowners, mortgage holders, or lenders. It can take many forms.
Involved fraud schemes involving dishonest lenders and investors. In this type of mortgage fraud, investors purchase a low-cost property, complete some poor quality repairs and sell the property back and forth among themselves at an inflated price, making the property seem more valuable than it is. These fraudulent investors may also have mortgage brokers and assessors on the scheme. When the investors find an unsuspecting buyer, they sell the property at an inflated price and the buyer is encouraged to use the dishonest lender as well. The buyer gets a property worth far less than the asking price and usually a mortgage with an inflated interest rate as well.
Lying on a mortgage application. Whether you are applying for a fixed rate or adjustable rate mortgage, you need to be honest about your income, assets, and other financial details. Trying to be dishonest and getting a mortgage under false pretenses usually counts as fraud.
Identity theft. In this type of mortgage fraud, someone posing as a homeowner takes out a mortgage on someone else’s property. The homeowner is left with a hefty mortgage they need to pay off as well as a lowered credit rating.