Fraud generally means any form of intentional misrepresentation and deception.
What is Mortgage Fraud?
According to the Federal Bureau of Investigation (FBI), mortgage fraud is “a crime characterized by some type of material misstatement, misrepresentation, or omission on a loan which is then relied upon by a lender. Basically, lying on your mortgage loan application is mortgage fraud.”
Mortgage fraud is a predatory lending practice that involves either the borrowers or lenders, and other industry professionals.
Why is Mortgage Fraud Committed?
First time homebuyers and industry professionals tend to commit mortgage fraud for many different reasons. Most commonly committed frauds are for housing and for profit.
Fraud for Housing
The borrowers’ goals of
Fraud for Profit
Loan officials and other industry professionals commit fraud for profit by misstating, misrepresenting or omitting important details about their personal or their customers’ employment and income, current debts and credits, or the value of the property and its condition with the objective of getting mximum profits on a mortgage loan transaction.
It is important to note that this type of fraud can be committed by any industry professional involved in the loan process. It can include the real estate agent, real estate appraiser, loan officer, credit and debt counselor, mortgage broker, insurance agent, escrow agent, builder and title company among others.
Some industry professionals also work together with a specific network to defraud lenders and borrowers, and underwriters to take advantage of these people for high fees and share any profits on all provided mortgage-related services.
Common Mortgage Fraud Scams
Foreclosure
Bait-and-switch schemes: The lender may promise one type of loan or interest rate but gets the borrower to agree to a different loan and higher interest rate.
Rain Tree Homes and Chase Manhattan Mortgage structured deals with low income and those with poor credit histories enabling them to purchase $175,000 (plus) homes with very little money down. While most of this case is considered fraud, which is “the intentional misstatement or nondisclosure of a mate...
The next portion of the chapter talks about how real-estate agents use information to gain power and wealth. Most real-estate agents have a better sense of knowing the condition that a home or apartment is in, and this gives them an upper-hand against the buyer or seller. Like the Ku Klux Klan, real-estate agents use secret words and information to
After the time of financial crisis, JP Morgan was not the only national bank in US which got involved in trade of toxic loans related to mortgage. Before JP Morgan, it was Goldman Sachs-another large US Bank that faced the allegation of manipulating the trades in its own self interes, ended up in favor of SEC while GoldMan Sachs were asked to pay $500 Million during late 2011 in a deal called Abascus 2007-AC1 where the bank were alleged to mislead its investors on a deal related to Collateral Debt Obligation(CDO). (Eaglesham, 2011) The ab...
Leading up to the crisis of the housing market, borrowers got mortgages without understanding the terms. Banks were giving out loans to people the banks weren't sure could pay the money back. The closer to the crisis, the higher the frequency of illegitimate loans and mortgages. Because there were so many mortgages on houses that could not be paid back, millions of mortgages were foreclosed on, and the houses we...
But the nasty reputation is founded in the few black sheep of the business. There are always those people who exploit and undermine the real estate market: George Parker, who made a fortune by selling national land to out of state tourists, like the Brooklyn Bridge and the Statue of Liberty. Fix and flip con men swindle on a lower scale than selling you your favorite landmark, but it is no less serious. Some con men buy properties, barely fix them, and sell them to a buyer who then has to spend thousands of dollars repairing a home he thought had been improved. Another con is when the e...
A deception is a form of a lie. Scams are similar to deception in the way that each are lies and are used to achieve the same goal. They are used to gain something about an individual whether it is trust, money information of some kind or simply
In the United States we face many issues such as poverty, death, health, and many others. But the issue that is currently effecting society the most is foreclosure. What is foreclosure? How has it effected society?. The definition of foreclosure is a legal or professional proceeding held by a lien holder which is a court order termination of equitable right of redemption amongst housing properties. Foreclosure has not just effected us financially, but has effected society physically.
Hanson, J. R. (n.d.). Fraud or confusion? RDH Magazine, 19(4). Retrieved 3 15, 2014, from http://www.rdhmag.com/articles/print/volume-19/issue-4/feature/fraud-or-confusion.html
This is the problem with the burst in the housing market. The third major factor that is causing the mortgage crisis is, mortgage fraud.
Mortgage loans are a substantial form of revenue for the financial industry. Mortgage loans generate billions of dollars in the financial industry. It is no secret that companies have the ability to make a lot of money by offering a variety of mortgage loan products. The problem was not mortgage loans but that mortgage companies were using unethical behavior to get consumer mortgage loans approved. Unfortunately, the Countrywide Financial case was not an isolated case. Many top name mortgage companies have been guilty of unethical behavior. Just as the American housing market was starting to recover from its worst battering since the Great Depression, a new scandal, an epidemic of flawed or fraudulent mortgage documents, threatens to send not just the housing market but the entire economy back into a tailspin (Nation, 2010).
Individuals like the two young and rambunctious mortgage consultants portrayed in the film gave loans to anyone and everyone that could sign the paper, regardless of the recipient’s ability to pay the loan in full. It is doubtful that all consultants fully understood the ramifications of their actions, but undoubtedly the overall disregard for consequence was the start of the collapse. Mortgage consultants mislead and tricked people into loans they could never afford by playing on their desire to live the American dream. Distributing adjustable rate loans to individuals without jobs, without collateral is unconscionable. Unfortunately, from their perspective they were helping these individuals. In a twisted way, these consultants were acting ethically from a utilitarian point of view. The consultants won because they received utility in the form of a bonus for distributing the loans, and the loanee won because they could now afford the home of their dreams. What the consultants didn’t consider in their calculations were the long term results and utility of their actions, unethically building the flawed foundation of the housing
It includes an employee or the organization and is deceptive to shareholders and investors. An organization can misrepresent its financial statements by exaggerating its income or resources, not recording costs and under-recording liabilities. A number of categories and sub-categories can be divided up for fraud. Some examples are consumer fraud, management fraud, employee embezzlement, Ponzi schemes and numerous
Fraud is defined as someone try to act with intention to cheat other people in order to acquire an unfair or illegal advantage. The fraud happens due to management override the internal control of the organisation and fraud will affect the financial reporting. The main categories of fraud that can affect financial reporting are fraudulent financial reporting and misappropriation of assets.
Based on the loan features(interest rates & other charges),eligiblity criteria and services provide the following case study of main players for home loans is given below: