Ethical and criminal violations in some industries have impacted the economy negatively. Housing and financial sectors in New Jersey are especially affected by this. These sectors present big opportunities for con artists to take advantage of unsuspecting home buyers.
Basics of mortgage fraud
Mortgage fraud as defined by the FBI is any misrepresentation, misstatements, or omission of facts used by a lender or underwriter to secure a loan. The definition indicates an individual or an industry professional can be guilty of fraud. The amount of money lost in mortgage scams may run in the millions.
Fraud falls under two categories: profit and housing. Industrial insiders, such as appraisers, mortgage brokers and attorneys, often commit profit fraud using their knowledge. They commit fraud to misuse funds.
Housing fraud involves the borrower intending to keep or take ownership of the property. They may falsely represent their income on a loan application or attempt to have an appraiser misrepresent land value. The economic repercussions of fraud can be seen during the 2008 housing crisis.
Common mortgage scams
Flipping property is not usually illegal unless an owner attempts to sell it below fair market value and manipulates the appraised value. The house flipper and seller agree to sell the buyer the property at a lower value. The flipper acts as the owner when they don't own it.
Occupancy fraud involves a borrower claiming a home will be occupied by the owner to win favoritism from the lender. However, the home commonly remains unoccupied, and the borrower uses a straw buyer with better credit. An air loan works similarly, but with a group using borrowers and property that don't exist. Some mortgage scams may involve identity theft where the borrower steals another person's information to get a loan.
Committing mortgage fraud comes with stiff penalties, but they could be false accusations. If a buyer or lender has been charged with mortgage fraud, an attorney with federal crime law knowledge may be able to help them.