What is Mortgage Fraud? by Attorney Carlos Gonzalez

LIt doesn’t matter if you have all the money in the world to buy the most luxurious home. All homeowners can agree, the process of buying a house is always stressful; and the stress doesn’t stop after you sign the contract and get the keys to your home. The additional headaches include buying furniture, setting up utilities and so on and so on. And once you finally settle in, and then come the first of many monthly mortgage payments. Keeping up with monthly mortgage payments requires financial discipline and it’s not uncommon for first-time buyers to have a missed payment or two. That’s why a lot of first-time buyers go in default and to keep the banks from foreclosing on their house, some homeowners commit mortgage fraud.

So what is mortgage fraud?

Occupancy fraud

1. Purchasing an investment property, but claiming it will be your personal residence. There’s a reason people are tempted to do this: cold, hard cash.

2. Claiming your home will be a vacation home when you intend to rent it out, or that it will be a primary residence when it’s going to be a second home.

Hiding debt

A lender decides how much home you can afford based on your monthly debt-to-income ratio—that is, the total of all your monthly debts, divided by your gross monthly income. So if you aren’t giving your lender the truth on your debts, it’s basing its assessment on false numbers.

Hiding your down payment source

Lenders need to see a complete financial picture before they commit to making you a loan; that includes all the debts you owe because they affect the funds you have available to make that mortgage payment each month.

Additional Mortgage fraud offenses

Appraisal fraud: when a home’s appraised value is deliberately overstated or understated.

Shotgunning: when multiple loans for the same home are obtained simultaneously for a total amount greatly in excess of the actual value of the property.

Cash-back schemes: when the true price of a property is illegally inflated to provide cash-back to transaction participants, most often the borrowers, who receive a «rebate» which is not disclosed to the lender.

Income fraud: when a borrower overstates his/her income to qualify for a mortgage or for a larger loan amount.

Occupancy fraud: when the borrower wishes to obtain a mortgage to acquire an investment property but states on the loan application that the borrower will occupy the property as the primary residence or as a second home.

In United States federal courts, mortgage fraud is prosecuted as wire fraud, bank fraud, mail fraud, and money laundering, with penalties of up to thirty years imprisonment. There are tons of paperwork that needs to be signed before, during and after in the home buying process. Lapse of judgment may occur due to stress from trying to keep up with it all. If you find yourself in a legal situation that concerns mortgage frauds don’t hesitative to call is at Carlos Gonzalez Law. We’ll take the time to review your case and defend you to the best of our abilities.