Housing loan fraud has become more popular over time and is an important concern during economic recessions. Upheaval in the housing market, property owners facing foreclosures, as well as unscrupulous individuals looking for easy money all contribute to climates in which housing debenture frauds may happen.
The Federal Bureau of Investigation defines housing loan frauds as material misstatements, misrepresentations, or omissions relied on underwriters or lending firms to insure purchase or fund debentures. By this definition, both applicants and lending institutions can clearly remove such frauds, even though the former may not think their omissions or misrepresentations are important enough to be a significant concern. Housing loan fraud is a general term that can refer to many fraudulent activities:
- Inflating appraisals to obtain mortgages for more than what properties are worth
- Claiming assets or income borrowers do not have
- Posing as borrowers on behalf of other people who are actually making the purchases
- Pretending to provide help to economically stressed property owners to skim off equities from homes
Housing debenture and forbrukslån (consumer loan) frauds can be initiated by borrowers themselves or fraudulent lending firms, real estate agents, brokers, or individuals looking for favors. People looking to buy a property or homeowners looking to refinance can be accidentally caught up in these frauds by acting on bad advice from fraudulent lending firms or real estate agents they trust.
Understanding housing loan frauds and a list of common scams
Magicians earn huge applause from individuals by pulling animals out of their hats or performing card tricks. But people who try to pull a trick with housing debentures earn prison time. Listed below are some examples of home loan scams that happen every day.
Housing debentures are considered the largest investment most individuals will make. With all the money comes tons of temptation for criminal elements. There are a lot of scams on the market today. Some of these common types are perpetrated by agents or firms and by property owners:
Because of the way self-employed individuals file their taxes, most of them fail to report their full income on their tax reports. Stated income loans allow borrowers to claim a particular amount, and underwriters base their lending decisions on what was stated by borrowers. If individuals inflate their income, it constitutes home loan frauds.
To know more about income statements, check out https://online.hbs.edu/blog/post/income-statement-analysis for details.
Conventional banks are reluctant to release funds to individuals who cannot prove that they have the money or financial means to make monthly amortizations. But a hefty down payment can sway a lot of lending firms’ opinions. If sellers need to dump properties, they can provide borrowers with enough funds for down payments under the table. With the funds in hand, buyers can illegally qualify for a home loan.
Owners-occupants refusing to occupy
Since lending firms tend to charge higher rates to non-owner occupants, a common scam tactic is to claim occupancy despite the fact that they do not live in that place. If buyers plan to purchase properties and claim occupancy, they need to pack their bags and move in. Otherwise, they will be committing a home debenture scam.
Getting down payments and repaying it
People are allowed to gift part of the down payment for the property on the condition that these gifts are not repaid. It is much like the under-the-table exchanges between sellers and possible buyers but in reverse. These gifts are given officially but then paid under the table.
Scams from professionals
On occasion, people may fall victim to scams perpetrated by home debenture professionals. These tend to be more complex and are hard to detect. It is a lot easier for individuals to choose trustworthy brokers or agents upfront compared to catching mortgage con artists red-handed.
When choosing these brokers, loan officers, or agents, people need to make sure that they are backed by long-standing financial institutions and can provide good referrals. People need to keep their eyes open for deals that are too good to be true because usually, they are. Individuals may also decide to pay for the services of lawyers to check and review all their debenture documents before closing.
Lawyers can provide definitive answers and will work on their behalf tirelessly. Scams in this industry are a very tricky topic, especially since loans tend to be pretty confusing. As the property market gets tighter and purchasers or sellers become more and more desperate, people can expect scams to rise. Armed with the necessary info, people will have the knowledge to avoid them completely.