How to Spot a Mortgage Scam

Mortgage fraud is when someone knowingly uses or facilitates the use of any deliberate misstatement, misrepresentation, or omission, knowing the same to contain a misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process.

In a press release by the Appraisal Institute the Financial Crimes Enforcement Network’s March 2012 Mortgage Loan Fraud Update, found that depository institutions submitted 19,934 Suspicious Activity Reports in the third quarter of 2011 pertaining specifically to mortgage loan fraud, a 20 percent increase over the previous year.

Law enforcement activities surrounding mortgage fraud across the U.S. have resulted in the arrest of thousands, according to reports. Some of the most devastating instances of mortgage fraud involve identity theft. Consumers not only have to be leery of questionable mortgage lenders, but also of others who might buy a home in their name.

30 yrs ago mortgages originated at a savings-and-loan from bankers who obeyed conservative lending rules. Sweeping changes in the finance world have created a system to helped raise homeownership to record levels, but  it also has led to far looser lending standards allowing fraud to proliferate.

Predatory lenders often go after Illegal immigrants, first time home buyers, unsophisticated buyers, low income buyers, poor people who are often used as straw buyers and the elderly who might have full equity and fall victim to deed fraud.

There are dozens of scams to be aware of:

Lenders offering financial incentives to find buyers

Lenders offering financial incentives to provide employment records

Lenders targeting poor neighborhoods

Double closings; borrowers signing multiple mortgages on the same property which settle quickly and prevent the lenders from discovering the fraud

In the event of possible foreclosure:

Contact lender to work out payments

Carefully review documents before signing

Signing any kind of deeds means you’re selling your home

Be aware of people contacting you offering bargain loans or easy credit

They key to increase your “mortgage intelligence”. The more you understand about the lending process the better informed you will be to prevent being scammed. And always do business with know reputable brands.

Robert Siciliano personal and home security specialist to Home Security Source discussing Real estate Agent safety on Inside Edition. Disclosures.