Question:

What are the most popular mortgage fraud schemes?

Answer:

There are many mortgage fraud schemes. Mortgage fraud and scams, property flipping, identity theft, straw buyer rings, underwriting fraud, to name a few.

Greed of lenders and borrowers is the main reason for a mortgage fraud. Both lenders and borrowers are in position to influence the house appraisal report; often borrowers want to get into a very expensive house without fully qualifying for the mortgage, and often lenders allow it for a bigger commission knowing the borrower will default.

In the case of straw buyer rings, people are offered money for their personal details and end up with hundred of thousands owed for loans they never applied for.

Property flipping is a mortgage fraud scheme applied to minorities and first-time homebuyers who are not familiar with the process of home purchasing. Flippers would get a cheap house, apply cosmetic repairs and pay for inflated appraisal. The potential buyer is getting a mortgage loan far exceeding the real house cost.

With a rent-to-own plan borrowers expect to get the house they have been renting for, say, 10 years. However, a provision in the contract states that the deal is off should the borrower skips a single payment. This mortgage fraud scheme can be easily avoided if borrowers do not seek seller financing.

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