Prevent Mortgage Lending Fraud

Mortgage lending fraud occurs when a financial institution, broker, or appraiser, willfully and knowingly misleads a potential borrower into a loan that they know will most likely fail in order to make an additional profit. 

Methods of lender fraud include:

–Having the borrower lie about their income.  This would allow the lender to issue a larger loan with a larger monthly payment that the lender knows will most likely default due to the fact that the numbers used to determine the size of the loan have been inflated.

–Charging excessive and unfair fees.

–Convincing borrowers to refinance their mortgage multiple times, each time increasing the monthly payment and eliminating much of the equity left in the home.

–Failure to provide good faith information, booklets, mandatory statements, etc. 

–Using false appraisals to sell a home for much more than it is worth. 

–Asking borrowers to leave certain portions of their mortgage contract blank.

It is important to note here that the presence of one or many of the above examples of lender fraud can’t be used to definatively state that the lender is attempting to defraud the borrower.  In some cases, the presence of one of the above indicators could be the result of poor employee training or honest to goodness mistakes.  The problem is that a mistake can carry many of the same consequences as intentional fraud, so it is always a good idea to have an attorney review any and all documents associated with the purchase of a home or the application for a loan. 

Any person who thinks that they may have been the victim of intentional or unintentional mortgage lending fraud is encouraged to contact a local attorney as quickly as possible.  If a person is falling behind on their payments because of mortgage lending fraud, a borrower may not only be able to stay in their home, they may also be entitled to certain damages. 

If a potential borrower detects the presence of one or many of the above indicators of mortgage lending fraud, the borrower is encouraged to sign nothing until the situation can be explained to an attorney.  If an attorney can review the documentation involved with the loan and feel comfortable in advising their client that it is safe to proceed, then there may not be too much cause for alarm.  If an attorney feels uncomfortable about pursuing a loan from a certain lender, potential borrowers should consider walking away and not looking back. 

Whether the damage that can be done is intentional or not, no borrower wants to be on the wrong end of an eviction notice because their lender failed to do their job properly.