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What constitutes mortgage fraud, and how you can avoid charges

Did you know that even a small "white lie" on your mortgage application could lead to very serious criminal consequences? Experts say that even seemingly innocuous untruths on loan applications can constitute mortgage fraud, a major crime that can lead to long-term problems. This so-called "creative financing" could force you to immediately pay the full balance of your loan, face massive fines and even spend time behind bars. Today, we help you learn a little more about what, exactly, constitutes mortgage fraud.

One of the more common types of mortgage fraud is falsification of employment income. Certain types of stated-income loans were initially designed for self-employed borrowers whose incomes are difficult to prove. However, some employed borrowers have used these methods to inflate their income numbers in order to receive a bigger loan. That is a big "no-no" in the mortgage community, and it can lead to criminal charges, even if the changes are barely noticeable.

Further, those who purchase residential real estate need to be honest about whether they intend to live in the home instead of renting it to another party. Most owner-occupants are able to get more favorable terms, so those who purchase rental properties may think there is no harm in claiming that they intend to live in the home full-time. Government officials have a way of finding out who is actually living in the home, though, which can cause serious repercussions against the borrower.

Experts say that the best approach to mortgage lending is simply to be clear, open and honest. However, some borrowers may be led astray by unscrupulous mortgage lenders -- and that could lead to criminal charges against the innocent home buyer. A criminal charge or arrest does not mean that you are automatically considered guilty of fraud; in fact, you have a variety of legal options. Both real estate professionals and borrowers are entitled to an unbiased legal proceeding if they are accused of fraud.

Source: About Home, "Mortgage Fraud - How to Avoid Mortgage Fraud" Elizabeth Weintraub, Jul. 21, 2014

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