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Mortgage fraud is more common than you think

Qualifying for a mortgage requires a lot of paperwork. With all that documentation, most would think that it would be virtually impossible to dupe a lender into extending them a loan they didn't really qualify for. However, that's not the case.

Each day, another individual is charged with mortgage fraud. Some who are charged with this crime lie about their current financial state in order to qualify for a loan of a certain amount. Others choose to be deceptive in terms of how they intend to use their property.

A home under the guise that it will be the buyer's primary residence, yet that is used as an investment one, is an example of occupancy fraud. Another example involves a borrower saying they'll be using their home as a vacation home when they really have intentions of renting it out.

Many investors feel compelled to lie because they can avoid being hit with an added 2.5 percent in up-front fees or 0.625 to 1 percent increased interest rate assigned to investment properties by doing so.

Hiding debt is also a type of mortgage fraud. Loans are extended to consumers based on their debt-to-income ratio. Both a credit report and two months' worth of bank statements are requested by lenders because they want to see if you have any undisclosed debts. Debts can inhibit a borrower's ability to repay their loan.

The most common type of mortgage fraud has to do with borrowers not being comfortable in disclosing where their down payment came from. While lenders are comfortable with friends and families gifting a portion of the down payment to their loved ones so they can get into their home, they are leery of lending to those who have to take out additional loans with interest to do so.

If it's determined you're being deceptive in applying for your loan, the funds might not only be withdrawn, but the bank may keep any monies you've already paid for appraisals or earnest money. If you've closed on the loan already, your loan could be recalled, requiring you to pay the full loan amount immediately.

In more serious cases, though, where higher value properties are at stake, monies are unrecoverable, or multiple properties are involved, a bank may look to have criminal charges filed against you. In the event that this occurs, the guidance of an Orange County, California criminal defense attorney will prove invaluable.

 

Source: realtor.com, "What is mortgage fraud? Steer clear of these 3 offenses," Cathie Ericson, accessed May 26, 2017

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