How To Help Detect Real Estate Fraud | Siouxland Houses
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Dear Monty: I rented my house to a couple who I thought were married. A year later, they decided to buy a house. The woman contacted me by phone to tell me that they were not married, and the loan she had requested indicated that she had to live alone. She then said they went their separate ways once they moved. The form I got from the lender just asked to pay on time, which she did. Even though the lender didn’t ask, should I have included that her prospective husband was on the lease? I have since found out that he is living in the new house. I should report it. Was she committing mortgage fraud?
Monty’s response: It is illegal to lie on a mortgage application. This is most likely mortgage fraud. Here is a dated Dear Monty article on mortgage fraud that offers information on what you can do. https://dearmonty.com/neighbourhood-committing-mortgage-fraud/. Mortgage fraud is a serious problem for the taxpayer. The dollar amounts on a single transaction loss are so large that the overall losses are large. She lied to you. If you wish to report it, the resources at the link above will investigate and determine if it is a crime. The penalties can be severe, but they vary from state to state.
Being aware that this is happening helps prevent real estate fraud
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# 1: Fraud to obtain property is one of the main circumstances in which mortgage fraud occurs. If you rent a house from others, you are more likely. For example, borrowers can pretend they own the house and lie about their income or other assets to get loan approval. They work together with one or more deceptive professionals, including anyone from an appraiser, real estate agent, lender, lawyer, title company or more. They create false documents to show the property and secure the loan. A close occurs and the borrower disappears with the loan proceeds.
# 2: Mortgage fraud is rare when it’s committed by someone you know. Suppose a parent has or can have access to your personal information. In this case, even someone you trust who has some real estate knowledge and is in desperate need of money could sell your home without your knowledge. Here is a link to a legal resource firm that describes this type of fraud in detail. https://www.hg.org/legal-articles/house-sale-through-fraud-49141
# 3: A more common type of fraud involves a dishonest appraiser, pinball machine, or home inspector working with a real estate agent. The agent identifies a probable prospect and puts the seller in contact with his chosen criminal partner. This person portrays your home in a negative way to influence your opinion. Your motivation, confidence level, or both allows you to buy into the assessment. The agent puts your house up for sale and a buyer immediately appears and buys the house. Shortly after closing, the buyer transfers the house to the real estate agent with a document that conceals the identity of the agent. In my experience, this ploy is probably more common than mortgage fraud because it may never be detected.
According to CoreLogic, investment loan applications are at considerably higher risk because real estate investors are experienced and make a profit. The profit motive introduces new factors and increases the risk of fraud.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home”. He advocates for industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at CherMonty.com
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