Weapons of Mass Destruction
       

      Equivocation - a statement that is not literally false but one that cleverly avoids an unpleasant truth.
      Damage count of white collar terrorism?   ANSWER

      By recognizing the fraudulent transaction, realizing the consequences and  adhering to the highest standards of integrity, conscience and
      forseeability  would greatly reduce mortgage fraud.

      Two types of Fraud

      Property Fraud

      Fraud for Profit

      The first is were someone lies about facts to get a mortgage (or deed of trust) to buy a property.
      The second is where someone lies about facts to make a profit.

      Fraud is committed by falsifications in the following ways:

      1.Loan application fraud. Where an applicant lies about their income and/or their job. Perhaps the down payment they are making was given to them
      by the person selling them the home and the value of the home inflated to cover it.

      2.Exaggerated appraisals. Appraisal is an art, not a science. Who can really be sure just how much a better view, or a swimming pool (for example)
      adds to the value of the property? The buyer wants the house, the seller wants to sell the house, the real estate broker wants to make the
      commission, the mortgage broker wants to make a commission.  There is a lot of pressure on that appraiser to massage the figures a little to create
      a value that makes all these people happy. We estimate that some 75% of appraisals are too high by at least a little.
      Not to mention the possibility that a crooked appraiser could be in league with a crooked seller, mortgage broker or borrower to give appraisals that
      are grossly exaggerated.
      We had an instance in Florida where a mobile home on land was appraised for 30,000. The appraisal report said it was in good condition. In truth
      the place was just about condemnable. You could see the ground through the floor in places, the roof leaked so badly that the ceiling had fallen
      away in many places, there were electrical outlets just hanging out of the wall by their wires etc. It was worth land value only, say 12,000.

      3.Falsified or fake credit reports. It's really not that hard to use modern technology to "clean up" a credit report by copying it and "losing" some bad
      stuff.

      4.False income. Applications can give the phone number, not of the company where the person supposedly works, but of a friend. The answer,
      look up the phone number of the employer in the white pages. Listen out for tell tale sounds, like children in the background in a supposed office
      setting.

      5.Forged tax returns. Easy enough to fake using products like TurboTax ® etc. The answer, ask the borrower to sign Form 4506 and get a copy
      direct from the IRS. Click here for a copy for form 4506.

      6.Fake title insurance.

      Fraud by Flipping

      This occurs when someone buys a property in bad shape for a cheap price. Say 50,000. They make some cosmetic repairs spending say 1,000 and
      then sell it at an inflated price say 80,000 to a buyer who puts little or no money down.
      The seller takes a mortgage back for a large amount, say 78,000, and gets a phony appraisal based on the inflated sales price.
      You are then offered the mortgage at a discount at what looks like an attractive yield.
      Soon after wards the buyer stops making payments and moves out. Leaving you with a trashed house.
      The key to this fraud is the inflated appraisal. Remember that appraising is an art not an exact science. Nonetheless an appraisal should be within
      10% of the true value of the property.
      This fraud can be hard to spot. Many legitimate investors DO buy properties for much less than their true value and are able to genuinely sell them
      for a higher price.

      The key is to check out the comparable properties on the appraisal form and satisfy yourself that they are truly comparable.

      Try to specify the appraiser and not use one provided by the investor.

      Check the credit rating of the new borrower. Especially if they have only put down a small down payment.

      Be wary of mortgages for sale that have not been aged, that is, a number of payments made on them.  
      Fraud  by Equity Skimming
      The real estate investor gets a high loan to value loan then doesn't make any payments on the house while renting it out and keeping the money, of
      course, during the collection and foreclosure action.

      Fraud by Straw Buying

      The borrower is really a real estate investor who intends to rent out the property, but they pretend they are going to live in it to get the lower
      interest rate and higher loan to value. This might not concern you as long as the payments are being made. But remember that interest rates to home
      owners are lower than interest rates to investors for a reason; lower risk.

      “RED FLAG” WARNING

      If you answer yes to one or more of the following questions, your lender may be
      engaging in predatory lending practices in violation of the FTC ACT or the Federal
      Trade Commission Act of Unfair or Deceptive Business Practices

      1. Red Flag Warning 1: Unaffordable Loan. Are you spending 50% or more of
      your gross monthly income for the new monthly mortgage payment? For
      example, you may be retired, disabled, handicapped or you may be consolidating
      (paying off) credit cards, auto, personal or other loans with this refinance and not
      reducing your overall monthly payments substantially. If your answer is yes,
      your lender may be making a home loan to you that you are unable to afford.

      2. Red Flag Warning 2: Financed Credit Insurance. Have you purchased single
      premium credit insurance with your new loan and is the single-premium credit
      insurance being financed through your loan? If your answer is yes, your lender
      may be engaging in predatory lending activity.

      3. Red Flag Warning 3: Repeated Refinancing. Have you refinanced your home
      more than once in the last 18 months and is your lender financing more than 400
      of you previous points and fees in your new loan? If your answer is yes, your
      lender may be engaging in repeated refinancing or “flipping” of you home in
      violation of the law.

      4. Red Flag Warning 4: Encouraging Nonpayment. Have you been informed by
      your lender that, because you are refinancing, you should not continue to pay on
      your existing loan? If your answer is yes, your lender may be encouraging you
      to default on your existing loan in anticipation of refinancing in violation of the
      law.

      5. Red Flag Warning 5: Unreasonably High Interest Rate. Do you have a new
      loan with an annual percentage rate substantially greater than the rate you think
      you would otherwise have qualified for? For example, your interest rate is more
      than 3% above the rates for 30-year fixed rate mortgages published in the
      Washington Post each Saturday in the Real Estate Section or the Washington
      Times each Friday in the Home Section. If your answer is yes, your lender may
      be using your credit scores inaccurately or improperly in violation of the law.

      6. Red Flag Warning 6: Failure To Report Good Payment History. Was your
      favorable payment history and information not reported to a nationally recognized
      credit reporting agency for a period of more than 6 months. If your answer is yes,
      your lender could be failing to report your favorable credit history and may be
      in violation of the law.

      7. Red Flag Warning 7: High Fees and Charges. Are you paying an amount in
      loan origination and discount points and other finance charges for your new loan
      (such as an amount equal to 5 loan origination or discount points)? If your
      answer is yes, your lender may be charging you a fee which, when considering
      your total home loan transaction, appears unconscionable.

      8. Red Flag Warning 8: Increased Interest Rate On Default. Do you have a
      home loan that includes a provision that increases the home loan’s interest rate
      upon default? If your answer is yes, your lender may be engaging in a predatory
      lending activity.

      9. Red Flag Warning 9: Improper Fees. Have you been charged fees for services
      that are not actually performed or charged loan discount points that do not reduce
      or materially result in a reduction of your interest rate? If your answer is yes,
      your lender may be acting in violation of the law.

      10. Red Flag Warning 10: Failure To Provide Notice. Did you fail to receive a
      copy of the “Red Flag” Warning (Form 601 (j)) from your lender within 3 days of
      submitting your home loan application? If your answer is yes, your lender may
      have failed to send you a required disclosure notice.

      11. Red Flag Warning 11: Prepayment Penalty. Have you been charged a
      prepayment premium, fee or charge? If your answer is yes, your lender may be
      engaging in predatory lending activity.

      12. Red Flag Warning 12: Balloon Payment. Do you have a home loan with a
      scheduled balloon payment in less than 7 years? If your answer is yes, your
      lender may be engaging in predatory activity.

      13. Red Flag Warning 13: Advance Waiver. Have you waived a violation of any
      provision of your new loan in advance of finalizing your loan? If your answer is
      yes, your lender may be imposing an advance waiver provision on you in
      violation of the law.

      14. Red Flag Warning 14: Mandatory Arbitration. Does your new home loan
      contain any mandatory arbitration clauses? If your answer is yes, your lender
      may be engaging in a predatory lending practice.

      15. Red Flag Warning 15: Limit on Court Relief. Does your new home loan
      contain any mandatory limitations on your right to seek relief through the judicial
      process? If your answer is yes, your lender may be engaging in a predatory
      lending practice


     The Detection, Investigation, and Deterrence of Mortgage Loan Fraud Involving Third Parties
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     Fraud Updates