Types of Mortgage Fraud
With the adapting changes in technology, ways of life have changed in the way we work, keep in touch, earn money, and…. How people conduct fraud.
March is fraud awareness month and we want you to be prepared as ever to understand what types of fraud are used in the mortgage industry. Committing fraud is never a good idea, but understanding what they are is beneficial to helping you avoid them. We want to make sure you understand the types of fraud you could commit and types of fraud that others could harm you with.
We are going to list 4 of the most common types of mortgage fraud that is seen today:
Types of Mortgage Fraud #1: Foreclosure Fraud
This type of fraud is normally geared towards vulnerable, low-income individuals whose homes are in foreclosure, or who are at risk of defaulting on their mortgage.
How this looks:
- The fraudster may approach the home owner and come up with a debt-consolidation scheme that typically involces paying upfront fees, and sometimes even the home title being transferred to the fraudster.
- The fraudster may originally give the home owner some money to help with repairs to show faith, but then treat them such as a tenant and collect “rent payments” which the fraudster ends up pocketing and ignoring bills and taxes (leading to debt-collection procedures against the owner).
- Since the home’s title is in the fraudsters name, there is nothing stopping the fraudster from re-mortgaging or selling the house, leaving you without the property title, homeless and in debt.
This may not seem common, but it happens all the time and many times fraudsters will look very legit. Please contact a refutable agency such as ourselves or your bank before making risky decisions.
Types of Mortgage Fraud #2: Fraud for Housing
It is important to understand that you can never provide false or misleading information on your mortgage application. A lie that is very common is people stating they will live in the property but actually having no intention of living in that home.
Types of Mortgage Fraud #3: Fraud for Title
This one is a scary one because the best way to avoid it, is to always make sure you never provide sensitive information such as your SIN number and to not fall for scams, viruses that attack your technology, or other fraud related scams that can affect the information that people have about you.
How this fraud works, is with the stolen information (as long as they have enough information), they will use those fake documents and identification to steal or change the title on a home you own. The fraudster will take out a mortgage on the home you own and when the bank lendes the money based on these stolen documents you will be left with that debt since it is in your name.
As stated above, please make sure to always have your sensitive information secure, and only provide things such as your SIN number ONLY when necessary.
Types of Mortgage Fraud #4: Fraud for Profit
You may also have heard the term “straw buyer” before. A straw buyer is someone who makes a purchase on behalf of another person because they have better credit ratings.
The home would be in the “straw buyers” name, so if the real buyer ever missed a payment or decides to abandon the home, it is the “straw buyer” who is held legally responsible for the mortgage debt.
Another type of fraud is a group of people working to artificially inflate the price of the home, which is not a legal practice and would be considered fraud.
These are the types of fraud that are common in the mortgage industry. It is important to understand them so that you do not get yourself stuck due to a fraudster scamming you and/or accidentally commit fraud yourself.
Buying a home is a major investment and it should ultimately come down to your decision. If you are feeling pressured by a third party, there is a chance that they are trying to take advantage of you. Always do research first and talk to reputable sources. We are always available to chat and would be more then happy to help you with any mortgage related questions, concerns or inquiries.