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Mortgage Fraud Claims a Growing Number of Victims

Francine L. Huff
LoanBiz Columnist

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Article Rating , 4 out of 5 based on 15 votes

Mortgage fraud is up as desperate homeowners engage in or become victims of a variety of schemes, according to a report from the Federal Bureau of Investigation (FBI). During 2008, suspicious activity reports jumped 36% to 63,713 compared with the previous year. Although there are no hard numbers for the total amount lost to mortgage fraud last year, 63% of pending FBI mortgage fraud investigations involved losses of more than $1 million.

Mortgage Loan Defaults and Foreclosures

Mortgage experts say the amount of fraud was directly related to the increase in defaults and foreclosures in housing markets around the country. Mortgage scams included property flipping, short sales, foreclosure rescues, reverse mortgage schemes, loan modifications, and credit enhancements. The Western region had the most investigations for fraudulent activity. The FBI report also said that if the economy continues to struggle, more cases of fraud could be reported.

Mortgage Loan Fraud

The vast majority of mortgage fraud, according to the FBI, was perpetrated against lenders by borrowers. But mortgage fraud against buyers can be carried out by mortgage lenders / brokers or underwriters who misstate, misrepresent, or omit information to fund purchases or insure loans. Others who may be in on the scheme include real estate agents, builders, or settlement attorneys.

So how can you tell if you are the target of a scam?

  1. You may be asked to lie about your income or debts.
  2. A property appraisal may be inflated to qualify you for a larger mortgage loan.
  3. You may be asked to sign over your property to an investor who claims to be able can help you avoid foreclosure.
  4. You may be asked to pay a fee upfront for "help" to have your mortgage loan modified.
  5. You may be offered money to lie about being the owner of a property.

If you suspect that you are being targeted by a mortgage scam, contact your state Attorney General's office. You can also file a complaint with the Better Business Bureau, your state's real estate licensing board if a real estate agent is involved, or the FBI.


About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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