In its recent annual report to the Mortgage Banker’s Association, the Mortgage Asset Research Institute described three emerging mortgage fraud schemes that are either new or increasing in popularity.

Top 3 Mortgage Fraud Schemes To Watch Out For

Foreclosure Prevention Schemes – These generally involve fraudsters posing as professional, knowledgeable foreclosure specialists. Homeowners facing the threat of foreclosure and nearing eviction are contacted by these “foreclosure specialists” who promise to work out their loan problems or buy their home and offer the homeowners tenancy. Unfortunately for the homeowner, the fraudster has no intention of following through with these promises and instead will manipulate the homeowner into deeding the property to them. Once the fraudster obtains the signed documents, a false lien release is generally filed or leveraged to secure funds from a fabricated sale or refinance on the property. In many cases, the homeowner is under the belief that they will rent the property for a period of time until they are in a better position to regain ownership rights. The fraudster continues to accept payments made by the homeowner while selling the property, absconding with the funds, and eventually
evicting the homeowners. Perpetrators of this type of fraud often move from town to town, sizing up their opportunities, quickly scamming as many homeowners as possible, inflicting costly damages, and then moving on to the next location.

Elderly and Immigrant Identity Fraud — While not new, elderly and immigrant fraud is regaining popularity. In this predatory practice elderly and non English-speaking consumers are taken advantage of by fraudsters who steal their identities and use them in strawbuying or other property transactions. This is currently happening in some reverse mortgage situations. Similarly, some immigrants who rent properties are discovering that their identities have been used on fabricated loan transactions. A simple inquiry about a loan product that leverages investment or rental properties can be enough to obtain information for use on fabricated loan transactions.

Builder Bail-Out Fraud – This involves securing funds for condominium conversion or planned community development properties that, unbeknownst to the investor, will not be completed. The scams entail multiple purchases from would-be investors or false identities on fabricated loan transactions. Investors are lured by photos or inspections of a few converted units used as models with promises of further rehabilitation of remaining units. Once the contracts are in place, the fraud continues as the perpetrator secures funding for the contracts; however, no additional work is done and the investors and lenders are left with incomplete and, in some cases, uninhabitable
dilapidated buildings.

Eleventh Periodic Mortgage Fraud Case Report To: Mortgage Bankers Association [MARI]
(Photo:morisius cosmonaut)

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