Mortgage Fraud on Rise in United States

Protect Yourself at Closing

Mortgage fraud is one of the hottest con games going around. Recently an FBI assistant director testified at a congressional hearing that fraud is pervasive in the mortgage market and is growing fast.

Through the first nine months of 2004, mortgage companies and banks reported more than 12,000 instances of suspicious activity surrounding the closings of mortgages.

It seems some mortgage loan officers, brokers, real estate agents and lawyers are creating fake credit scores, tax returns and identities and ordering inflated appraisals. Some fraud may be lying about a borrower’s income or lack of candor about where the buyer got his down payment cash.

In most instances, mortgage fraud ends up hurting not only lenders but also innocent consumers and witnesses. One example cited was a first-time buyer who was persuaded to purchase a property that was significantly overvalued because of a fraudulent appraisal. The seller pocketed big profit. The buyer found herself unable to refinance and unable to pay off her loan by selling the house because the property was worth less than the mortgage amount.

Because of a five-fold increase in mortgage fraud over the past three years, the National Notary Association was asked by the FBI to inform mortgage fraud investigators of the Notary’s role in deterring, detecting and prosecuting forgery and other forms of identity crimes.

The National Notary Association offers some tips to protect against mortgage fraud.

• Make sure the name on your application matches the name on your primary form of identification. The notarization at the closing table may be delayed, and possibly denied, if these names don’t match.

• Know and understand the terms of the mortgage. Bring all your loan information with you to the closing so that you can compare the list of loan terms, the loan type and the interest rate information on the documents with the loan terms that you agreed to when the documents were drawn.

• Don’t assume your lender has captured all of your personal information accurately. Check your application information against the final loan documents to ensure that the information is correct and complete.

• Never sign any loan documents that contain blanks. The documents should not be notarized if there are blanks. Blanks make you vulnerable to fraud.

• Know your right of rescission period and if it applies to your loan. If you have a rescission period you will have three days to cancel the deal. Understand that if you exercise your right to rescend, there may be other risks you hadn’t anticipated, like losing your locked in mortgage rate.

• Know what you are signing. If you have any questions related to the specifics of your loan, ask you loan officer before you sign your documents. The Notary’s role is an impartial, third-party witness.

• Make sure you and the Notary are in the room at the same time the document is being signed. You must appear in person in front of a Notary to have your signature notarized, even if the documents have been exchanged electronically throughout the process.

Source: Dr. Bernice Wilson, Urban Resource Management Specialist, Alabama Cooperative Extension System, (256) 372-4649

Posted by Jim Langcuster at February 24, 2005 08:04 AM