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Mortgage fraud: suspicious activity on the rise in 2010

Mortgage loan fraud suspicious activity reports (SARs) rose 7 percent in the first half of 2010 to 35,135 from 32,926 a year earlier, according to the Financial Crimes Enforcement Network (FinCEN). The rise in the number of reports is partly due to “increased attention to older loans spurred by repurchase demands.”

“SARs are one of the most important sources of lead information for mortgage fraud investigations available to law enforcement,” FinCEN Director James H. Freis, Jr. said in a statement. “As a member of the President’s Financial Fraud Enforcement Task Force, FinCEN remains active with law enforcement and other partner agencies in the task force to provide lead information and to identify potential abuses in order to combat mortgage loan fraud.”

Spotting a home loan scam

Mortgage fraud is perpetrated through a variety of schemes. Among the types of fraud that could occur are:

  • Flopping, which is a flipping scheme that occurs when a foreclosed property is sold at an artificially low price to a straw buyer, who turns around and sells it at a higher price and keeps the difference.
  • Submitting fraudulent home loan documents to mortgage lenders. In some cases dishonest mortgage professionals may submit phony documents that inflate the salaries and assets of borrowers.
  • Inflating home appraisals to qualify for mortgage loans
  • Foreclosure rescue scams that target homeowners who are having trouble making mortgage payments

What should you do?

Mortgage fraud can steal your money and your sense of security. That’s why it’s important to take steps to guard against becoming a victim. Among the things you can do to protect yourself are:

  • Get referrals for real estate and mortgage professionals from trustworthy friends and family members
  • Never sign documents that you have not read and do not understand
  • Use a reputable attorney to review all the documents and terms of your transaction
  • Check to make sure that all documents have information that is correct
  • Make sure that a comprehensive title search has been done on the property
  • Be skeptical of real estate professionals who require you to use specific mortgage lenders or home appraisers

Senior citizens are often vulnerable to scams. If you have an elderly relative who seems to be caught up in a troublesome financial transaction, try to find out as much information as you can to determine if they are being scammed.

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