Mortgage Fraud is when a person knowingly produces documentation or signatures that they are aware to be incorrect. Example – false signatures or doctored information such as false income added or created on a W-2 or Paystub, as well as, possibly doctoring previous title work as well.
There are numerous ways to commit mortgage fraud. If you are asking this question in concern whether or not you are committing mortgage fraud, well then my best advice would be to do your job to the best of your ability and do not do anything that you know is wrong.
Generally speaking, there are two types of mortgage fraud: fraud-for-home and fraud-for-profit.
Probably the most common type, even though you don’t hear much about it in the press, is fraud-for-home. This typically constitutes someone lying about how much money they make, how much money they have in the bank, how long they have been employed, whether they are even employed at all, etc. in order to qualify for a mortgage and buy a house.
Another example is telling the lender that you plan on occupying the house as your primary residence when you really intend to rent it out. So, if a lender has certain qualifications that you must meet in order to get a mortgage and you provide the lender with false information in order to show that you meet any or all of those requirements, that is mortgage fraud.
The other type of mortgage fraud, fraud-for-profit, is what you usually read about in the paper. Usually this type of mortgage fraud involves several people and can be very complex. One example might involve a loan officer, an appraiser, a real estate attorney and a few people with good credit. They find a run-down house to buy for cheap, have the appraiser value it for much more than it’s worth and sell it to a third person. The third person, who is part of the scheme, usually obtains a loan for much more than the real value of the home and the participants split the difference between the mortgage obtained and the price the ringleader paid for the home. The third person walks away from the mortgage and the house goes into foreclosure.
All the way around, mortgage fraud hurts everyone.