Bradenton Buyers and Sellers Must Guard Against Mortgage Fraud
Mortgage Fraud Series #6
Buyers and Sellers of real estate in Bradenton, Florida must guard against mortgage fraud. It is no longer a misdemeanor if you are convicted of fraud. It is now a felony and jail time will be served. The FBI is cracking down on Mortgage Fraud and people are going to jail. You could easily be charged with a crime if you are involved in any of the following types of schemes.
Flipping For Felonies
Buying a property for a low price and selling it at a higher price isn’t a crime unless fraud is involved. It is illegal when the appraisal is bogus making the property appear to be worth more than it really is. These schemes usually involve one or more of the following: fraudulent appraisals, doctored loan documents, inflating buyer income, kickbacks to buyers, investors, property/loan brokers, appraisers, or title company employees.
Bogus Second Mortgage
There is nothing illegal about a seller holding a second mortgage for a buyer. What is illegal is for the seller to provide money to the buyer through the issuance of a non-disclosed second mortgage. Because it is hidden, the primary lender believes the buyer is investing his own money with the down payment, when in fact, it is borrowed. Sometimes in this scheme the second mortgage is disclosed but soon “forgiven” by the seller.
Straw Buyers/Fake Buyers
In this scam a buyer with poor credit needs a stand-in with good credit. The real buyer gets somebody to fill out all the paperwork and obtain the mortgage, then has the property quit claimed over to them. The rub is that the actual borrower remains on the hook for the mortgage. If the scammer decides not to make the payments it is the straw buyer who is on the hook. The moral of the story is: never let someone else use your credit.
Identity Theft or Stolen Identity
Another type of mortgage fraud involves fictitious or stolen identity. Stolen identity may be used on the loan application. The applicant’s name, personal identifying information and credit history are used without the true person’s knowledge. There has been a sharp increase in the number of people who receive a foreclosure notice on a property they did not really buy.
Bogus Appraisals and Cash Back Schemes
This scheme usually involves an appraiser who is in collusion with a borrower and provides a fraudulent appraisal report to the lender. In in our Bradenton, Florida market one scheme involved buying homes at full price, then generating a fake appraisal to refinance the home and take $100,000 or more out of the property. Payments were never made and the scammers took the money. Today the mortgage broker, buyer, title agent and Realtor are in prison.
Foreclosure Rescue That Isn’t
Today’s declining real estate market is making this a popular scam. The criminal finds homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. They dupe the homeowners into believing that they can save their homes and seek up-front fees from the seller. They get the seller to deed the property to them and they remortgage the property telling the seller they can stay in the property. The scammer then takes the money and disappears. The property is foreclosed and the homeowner is left out in the cold.
It’s Called Equity Skimming
This is a bold scheme of pure fraud. An investor may use a straw buyer, false income documents, and false credit reports, to obtain a mortgage loan in the straw buyer’s name. After the closing, the straw buyer signs the property over to the investor with a quit claim deed which relinquishes all rights to the property and provides no guaranty to title. The investor makes no mortgage payments and rents the property until foreclosure takes place several months later. The investor keeps the rent money. One day the sheriff shows up to announce to the unsuspecting tenant that all of their belongings are being set out on the street.
Air Loans on Invisible Property
In this case there is a non-existent property loan with no collateral. An example of an air loan would be where a broker invents a borrower and properties, establishes accounts for payments, and maintains custodial accounts for escrows. They may set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency, etc., for verification purposes. This is a complicated scheme that usually involves millions of dollars.
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(Copyright © 2007 By Dan Forbes, All Rights Reserved.)
Please contact me, Dan Forbes, a call if you have questions about or our Bradenton, Florida real estate market at 941-746-0505; toll free 877-646-8326. Visit my web site BradentonFloridaRealEstate.com
