Taking out a mortgage is probably the biggest financial transaction most people ever make in their lifetimes — and it’s a scary, confusing process. Unfortunately, unwary consumers can be led astray by unscrupulous mortgage brokers and lenders. Before you take out a mortgage, it’s important to realize that you can get into serious trouble if you’re involved in any kind of mortgage fraud — even accidentally.
Genuine mistakes versus intentional ones
Genuine mistakes happen on mortgage applications from time to time. True mortgage fraud occurs when something is purposefully omitted from a mortgage application or information is altered to make your application sail through underwriting.
If a mortgage broker suggests that you overstate your income levels a little in order to qualify more easily, don’t give into temptation.
Hidden kickbacks and secret mortgages
Another version of mortgage fraud occurs when borrowers don’t disclose — on paper — secondary deals that they’re making to secure the purchase of a piece of property. For example, borrowing the down payment from a relative constitutes a secret mortgage if the bank is unaware of the debt. If a homeowner agrees to sell you the house at a slightly higher price on paper (in order to secure a larger loan) so that you can use the difference to pay for some necessary repairs, that’s a hidden kickback that is actually fraud.
Falsifying residency or deposits
If you are buying a property as a rental, you won’t get the same rate on your loan that you’d get on a property you plan to live in — but lying about your intentions will get you in hot water. So will making a deal with the seller to claim you already put down a deposit (like in a land contract) when you haven’t.
Basically, consumers need to be sure that they never let anyone talk them into doing anything remotely “off the books.” Nor should they ever knowingly sign their name under false information. If you find yourself accused of mortgage fraud, it’s important to get legal assistance quickly.