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Mortgage Fraud Risk

Greed, ignorance, and good intentions are the various starting points for mortgage fraud. Whether a person is looking for a home to live in that's nicer than he can legitimately afford, or he's looking to flip a property to make a quick buck, mortgage fraud entails lying or hiding information from the bank to get more favorable loan terms.

There are two main types of mortgage fraud: "fraud for profit" and "fraud for house." While "fraud for profit" schemes are fairly clear-cut in their dubiousness, "fraud for house" is often committed by people who aren't aware of the seriousness of their actions. Some truly don't think of what they're doing as wrong.

"Fraud for house" is committed when a person falsifies her income or credit information in order to qualify for a home loan that she knows she couldn't qualify for based on her true financial circumstances.

Oftentimes this type of fraud seems innocent—after all who'll get hurt if I fudge the numbers just a little bit? However, as we've seen with the record number of foreclosures happening in recent years, too many people have gotten themselves involved with real estate deals that they simply couldn't afford.

A single foreclosure can reduce the property values for everyone on the street, which can lead to entire neighbourhoods with slumping real estate values. Thus, one little lie on an application can have serious consequences: for the bank who never recoups their money, for the homeowners who lose their homes, and for the rest of the economy that takes a hit right alongside the real estate market.

"Fraud for house" cases commonly involve a buyer exaggerating their income on the application form, or in some cases, by getting financial aid from the seller without notifying the lender. This type of loan is known as a "silent second," where the seller offers to help the buyer come up with the down payment, while keeping the bank in the dark. This is problematic because the bank gets a false picture of the buyer's financial resources. The bank then authorizes a loan based on inaccurate information, and risks not ever getting their money back.

Another popular form of mortgage fraud involves what's known as a "straw buyer" or a "nominee loan." In this type of fraud, a buyer uses someone else's credit and income information on their loan application. He may decide to pay a person to use their information, or he might steal somebody's identity to get their data.

The person whose financial information is being used is known as the "straw buyer." She is simply the buyer on paper, and has no intention of ever living in the home or of making the mortgage payments.

For the bank, this situation is very risky. There is a person that they don't know that's living in the home. They could have very low income or a poor credit history, which means that the bank's chance of getting their payments is very slim. Fortunately, if the bank doesn't receive its monthly payments, it's within their rights to go after the straw buyer for remuneration.

Lenders check borrowers' financial information for a reason. They want to make sure that you get a home that you can actually afford. Buying beyond your means can result in a financial disaster for you, and major losses for the bank. While you may have your eye on an upscale property, if it's beyond your means, it's beyond your means. Lying to the bank to get the financing you need is illegal and unethical, no matter how sincere your intentions were.

About the Author:

Complete Calgary real estate listings search: View all Southwest Calgary homes including Signature Park homes for sale. Access photos, virtual tours, neighbourhood info, maps and more at JustinHavre.com.

Article Source: ArticlesBase.com - "Fraud for House" Mortgage Scams

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Mortgage Fraud Mississippi

Federal Reserve Board Chairman Ben Bernanke has confirmed the Housing Predictor forecast that more than 2 million homes will be foreclosed as a result of the sub prime lending crisis.

In a hearing before the Congressional House Financial Services Committee in Washington D.C., Bernanke essentially confirmed the Housing Predictor forecast issued in early June, saying more foreclosures will occur as a result of fall out from the sub prime debacle.

However, he differed with one congressional committee member's estimates that 1.5 million foreclosures would occur alone in 2007. Bernanke conceded that the rate of foreclosures caused by the nation's sub prime crisis would worsen in 2008 and 2009 without citing any figures, but agreed the figure would go into the millions.

Bernanke made his comments in semi-annual testimony before a congressional committee, which is looking into ways to assist the nation's lending economy to help resolve the sub prime crisis. The Chief Fed Chairman deplored "abusive lending practices and outright fraud" in the wake of near record foreclosures caused by the sub prime crisis.

The Housing Predictor forecast was based on an analysis of the nation's largest metropolitan real estate markets conducted over a one month period by a team of researchers and journalists. Housing Predictor forecasts more than 250 local housing markets in all 50 U.S. states.

The web site is regularly consulted by many of the nation's foremost Wall Street investment houses, mortgage and real estate companies, and consumers for its forecasts, which are updated regularly as local market conditions demand.Foreclosures are at near record levels in Michigan, Minnesota, Ohio and Colorado. Other states that are experiencing the highest number of foreclosures include California, Alabama, Indiana and Mississippi.

However, the fall out from the sub prime meltdown is not extending into all of the nation's housing markets on a widespread scale. Foreclosures are occurring more commonly in lower middle class and poorer neighborhoods. Many housing markets, including vacation and second home markets and higher priced areas are immune from the fall out of foreclosures.

Eighteen states real estate markets are appreciating and an additional 10 states housing markets are showing signs of stabilizing. Many of the foreclosures are occurring as a result of increases in adjustable rate mortgages, and unethical lending practices on the part of some mortgage borrowers and lenders.

About the Author:

Mike Colpitts is the Editor of Housing Predictor. To read the entire foreclosure forecast, check local market forecasts and search real estate listings visit

http://www.housingpredictor.com

Source - Fed Chief Confirms Housing Predictor Forecast

Couple Sentenced In Mortgage Fraud

Mortgage Fraud Prosecutions

Two bills designed to address some of the problems resulting from the economic crisis have been signed by President Obama. The first deals with mortgage fraud and the other with helping families who are involved in a foreclosure situation save their homes.

Look out rip-off artists, enforcers of the new mortgage fraud bill means serious business. Almost half a billion federal dollars has been authorized to spend on targeting charges of mortgage fraud. Agencies the likes of the Secret Service, U.S. Postal Service and HUD are all getting additional funding to increase their security measures.

The Fraud Enforcement and Recovery Act now sanctions the government to go after companies or individuals currently out of reach. Currently, an incidence of mortgage fraud can result in investigation, prosecution, civil penalties and prison time at a federal level, opposed to the prior gentler state penalties previously enforced. This new Act applies to all types of mortgage fraud, no matter how minor the offence.

In the past, these schemes defrauded home owners, realtors, lenders and builders out of billions of dollars each year. The FBI intends to send a message that mortgage fraud will not be tolerated and it is expected that offenders will receive stiff penalties in order to set an example to others.

The second bill, simply entitled, "Helping Families Save Their Homes Act," is intended to simplify the process for homeowners to receive foreclosure financing and modifications to existing loans. It also makes it easier for the lender to offer these types of options and hopefully prevent an impending foreclosure.

The new law also offers protection for renters who find themselves living in a home whose owners are facing foreclosure. Under the old rules, tenants would have to move immediately following foreclosure, now they have the option to continue renting for a term negotiated with the lender. This makes sense on so many levels. Now hundreds of families who otherwise would have found themselves on the street, still have homes. Lenders no longer have to deal with the problems associated with the upkeep of an empty home. Hopefully this will reduce occurrences of complete neighborhoods of foreclosed houses sitting vacant and facing ill repair and vandalism. In many cases, reliable tenants are happy to stay on and maintain the property.

The law provides additional homeless relief, makes better use of local organizations in this role, and allows them more latitude when allocating federal funds for assistance.

Part of the reason that mortgage fraud became so widespread was attributed to the lack of a single watchdog affiliation to oversee the the sketchy subprime loan offerings, underwriting and lending schemes. Instead there were a number of small agencies, each only seeing part of the problem, but no single unit had the power to actually deal with the issue as a whole. Currently, the Obama administration has a plan in the works to establish a single federal agency designed to watch over everyone involved; from the small brokers to the major lenders.

About the Author:

Search Sandy Springs GA condos at TinaFountain.com, the home of Sandy Springs real estate experts.

Source - Mortgage Fraud Bill Signed, Sealed & Delivered

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