Tuesday, May 1, 2012

Mortgage Fraud Up in Georgia

Mortgage Fraud Up in Georgia

You’ve heard the saying – “If it sounds too good to be true, it probably isn’t.” That certainly holds true in the mortgage industry, where instances of fraud are increasing and it’s not just the lenders who are being hurt by instances of fraud.

According to an article on Georgia’s Department of Banking & Finance website, residential mortgage fraud, which cost millions of dollars to lenders, taxpayers and consumers, is becoming even more prevalent in Georgia.
“With sophisticated electronic document-preparation programs, unethical mortgage loan officers, brokers, real estate agents and lawyers can create fake FICO scores, fake tax returns, fake identities and obtain inflated appraisals. According to the FBI, based on existing investigations and mortgage fraud reporting, 80% of all reported fraud losses involve collaboration or collusion by industry insiders,” the article states.

While lenders are generally the victims of fraud, as they are held accountable for the costs, borrowers can be victims as well. One mortgage company told of an instance where a customer is stuck with a loan he can’t refinance or pay back. After receiving a fraudulent appraisal that greatly overvalued the home, he was persuaded to pay significantly more for the home than it was worth. The seller made a big profit but the buyer is stuck with a mortgage higher than the value of the property.

The best way to avoid any type of mortgage fraud, of course, is to deal with a reputable lender. You want to make sure that any company or individual you may be dealing with is licensed in your state by the Nationwide Mortgage Licensing System and is a certified Fannie Mae/Freddie Mac seller/servicer. You should also ask for names and contacts of recent clients and contact them for references. (For more on how to find a lender, see my column from April 16)

Ask questions. If your lender asks you to sign documents that contain false statements or if you see appraisals on a property that don’t seem in line with others in the neighborhood, ask about it. Or just walk away and report it to the Department of Banking and Finance.

If you’re unsure about any part of the process when obtaining a loan, seek help from the MBA Consumer Help Desk. This website has information and tips on identifying predatory lending and mortgage fraud and what to do if you encounter it. It also helps explain the process, as what is normal and ethical and part of obtaining a loan can seem foreign or strange to first-time homebuyers.

Because fraud is increasing rapidly with costs to lenders, taxpayers, consumers and communities, the FBI and MBA are taking it very seriously. The MBA is encouraging increased awareness and enforcement and with the FBI produced the FBI Mortgage Fraud Warning Notice into their loan processes. The notice warns that mortgage fraud is a federal offense that will be investigated by the FBI, and is punishable by up to 30 years in federal prison, a $1 million fine or both.

You can find out more on fraud on these websites:
Georgia Real Estate Fraud Prevention & Awareness Coalition
Mortgage Fraud Prevention and Resource Center of Mortgage Bankers Association (MBA)
Cal Haupt, President and CEO of Southeast Mortgage

Phone: 770-279-0222
Website: www.southeastmortgage.com

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