Examples of Mortgage Fraud

Again i know this post may seem like it doesnt belong on a credit repair scams website, however somone left a comment requesting i write something on mortgage fraud, so here we are and his comment can be seen under the post Investment Scams.

Occupancy fraud: This occurs where the borrower wishes to obtain a mortgage to acquire an investment property, but states on the loan application that the borrower will occupy the property as the primary residence or as a second home. If undetected, the borrower typically obtains a lower interest rate than was warranted. Because lenders typically charge a higher interest rate for non-owner-occupied properties, which historically have higher delinquency rates, the lender receives insufficient return on capital and is over-exposed to loss relative to what was expected in the transaction. It is considered fraud because the borrower has materially misrepresented the risk to the lender in order to obtain more favorable loan terms.

Income fraud: This occurs when a borrower overstates his/her income in order to qualify for a mortgage or for a larger loan amount. This was most often seen with so-called “stated income” mortgage loans (popularly referred to as “liar loans”), where the borrower, or a loan officer acting for a borrower with or without the borrower’s knowledge, stated without verification the income needed to qualify for the loan. Because mortgage lenders have begun to tighten underwriting standards and “stated income” loans are less available, income fraud is increasingly seen in traditional full-documentation loans where the borrower forges or alters an employer-issued Form W-2, tax returns and/or bank account records to provide support for the inflated income. It is considered fraud because in most cases the borrower would not have qualified for the loan had the true income been disclosed. The “mortgage meltdown” was caused, in part, when large numbers of borrowers in areas of rapidly increasing home prices lied about their income, acquired homes they could not afford, and then defaulted.

Employment fraud: This occurs when a borrower claims self-employment in a non-existent company or claims a higher position (e.g., manager) in a real company, in order to provide justification for a fraudulent representation of the borrower’s income.

Failure to disclose liabilities: Borrowers may conceal obligations, such as mortgage loans on other properties or newly acquired credit card debt, in order to reduce the amount of monthly debt declared on the loan application. This omission of liabilities artificially lowers the debt-to-income ratio, which is a key underwriting criterion used to determine eligibility for most mortgage loans. It is considered fraud because it allows the borrower to qualify for a loan which otherwise would not have been granted, or to qualify for a bigger loan than what would have been granted had the borrower’s true debt been disclosed.

Fraud for profit: A complex scheme involving multiple parties, including mortgage lending professionals, in a financially motivated attempt to defraud the lender of large sums of money. Fraud for profit schemes frequently include a straw borrower whose credit report is used, a dishonest appraiser who intentionally and significantly overstates the value of the subject property, a dishonest settlement agent who might prepare two sets of HUD settlement statements or makes disbursements from loan proceeds which are not disclosed on the settlement statement, and a property owner, all in a coordinated attempt to obtain an inappropriately large loan. The parties involved share the ill-gotten gains and the mortgage eventually goes into default. In other cases, naive “investors” are lured into the scheme with the organizer’s promise that the home will be repaired, repairs and/or renovations will be made, tenants will located, rents will be collected, mortgage payments made and profits will be split upon sale of the property, all without the active participation of the straw buyer. Once the loan is closed, the organizer disappears, no repairs are made nor renters found, and the “investor” is liable for paying the mortgage on a property that is not worth what is owed, leaving the “investor” financially ruined. If undetected, a bank may lend hundreds of thousands of dollars against a property that is actually worth far less and in large schemes with multiple transactions, banks may lend millions more than the properties are worth.

I know this is a little outside the box for a credit repair scams website, but a reader recently asked for some information about Investment scams and I just so happened to have some information on had so here we go…

Online Investment Newsletters

Hundreds of online investment newsletters have appeared on the Internet in recent years. Many offer investors seemingly unbiased information free of charge about featured companies or recommending “stock picks of the month.” While legitimate online newsletters can help investors gather valuable information, some online newsletters are tools for fraud.

E-mail Spam

Because “spam” – junk e-mail – is so cheap and easy to create, fraudsters increasingly use it to find investors for bogus investment schemes or to spread false information about a company. Spam allows the unscrupulous to target many more potential investors than cold calling or mass mailing. Using a bulk e-mail program, spammers can send personalized messages to thousands and even millions of Internet users at a time.

Bulletin Boards

Online bulletin boards – whether newsgroups, usenet, or web-based bulletin boards – have become an increasingly popular forum for investors to share information. Bulletin boards typically feature “threads” made up of numerous messages on various investment opportunities.

While some messages may be true, many turn out to be bogus – or even scams. Fraudsters often pump up a company or pretend to reveal “inside” information about upcoming announcements, new products, or lucrative contracts.

How to Use the Internet to Invest Wisely

If you want to invest wisely and steer clear of frauds, you must get the facts. Never, ever, make an investment based solely on what you read in an online newsletter or bulletin board posting, especially if the investment involves a small, thinly-traded company that isn’t well known. And don’t even think about investing on your own in small companies that don’t file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check the truth of every statement about the company. For instance, you’ll need to:

* Get financial statements from the company and be able to analyze them;

* Verify the claims about new product developments or lucrative contracts;

* Call every supplier or customer of the company and ask if they really do business with the company; and

* Check out the people running the company and find out if they’ve ever made money for investors before

Credit Repair Scams - It’s no secret that Americans have a debt problem. Among U.S. households with credit cards, the average outstanding credit card balance was $10,679 at the end of 2008, according to the Nilson Report. And with unemployment in double digits in some states, more and more Americans have credit reports that include delinquencies, bankruptcy or foreclosure.

“Even if you’ve had good credit your whole life—and a job loss or illness puts you behind in your debt repayment—you’re a potential target for ‘credit repair scams,” says Ben Hanania. Hanania is Chairman of the Ethical Credit Repair Alliance, a consumer watchdog group that monitors the credit repair industry.

“Good credit has never been more important,” says Hanania. “A bad credit score can cost you a job, or prevent you from getting insurance coverage. And people will poor credit pay higher interest rates on loans and credit cards—if they can get them at all. So if you get an email that promises to ‘erase your bankruptcy’ or ‘eliminate a foreclosure’ from your credit report, it can be very tempting,” says Hanania. “But the truth is, it’s impossible to remove negative information from a credit report if the ‘black marks’ are accurate and timely.”

So how can vulnerable consumers protect themselves from credit repair scams? The Federal Trade Commission says consumers should watch out for these credit repair red flags:

The company wants you to pay for credit repair services before they provide any services.
The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.

The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

“There are a lot of outstanding professionals in the credit repair industry,” says Hanania. “Since up to 80% of credit reports contain errors or inaccuracies, there’s definitely a need for credit repair services. But it’s so frustrating when a handful of bad actors can victimize so many people and give honest credit repair companies a bad name.”

Credit Repair Scams: The economy isn’t in the best of shapes and hasn’t been for a couple of years now and many of us who have never had to deal with debt previously are now doing so, and many of us for the first time.

The first step anyone should take is to find out the actual status of their credit and to do this they will need a copy of their credit report from each of the three credit bureaus; Experian, Equifax and TransUnion.

Can you get free credit reports?

Not everyone is aware of this but every single US citizen is entitled to a free credit report from each of the three bureaus every 12 months, the reason many people are not aware of this is that the government and consumer councils will not spend money to advertise this fact.

Credit Report Scams: Unfortunately, this is why many companies will try to take advantage of this lack of public awareness. You may well have seen or heard advertisements on everything from local radio to the internet about how you can receive free credit reports; but just because these ads repetitively mention that the credit reports are free it doesn’t necessarily mean that they are!
In a large number of cases, once these companies are approached, they will ask you to make some kind of purchase or sign up to a third party credit repair or monitoring service before they will release your free credit reports.

It happens; we get behind in our payments and suddenly our credit score starts dropping. But turning to those so-called credit repair companies won’t bail you out of trouble.

It’s so easy to fall into the trap, in these tough times, many of us end up using credit cards just to get by. Now you cant keep up with the payments and your credit score begins to take a hit. Then when it comes to repairing your credit, many ads make it sound effortless, with companies claiming they can clean up your record. But Angie Barnett with the Better Business Bureau says, “Nobody can do that. You really can’t.”

Credit Repair Scams

The BBB says no one can remove negative information from your credit report if it’s accurate and only time can undo the damage. Still, credit repair firms persist, claiming they can get rid of everything from late payments to bankruptcies. And many charge you, often upfront, for their service. But according to a message we found on the Federal Trade Commission’s website, that’s illegal. In that message, Bureau of Consumer Protection Director Eileen Harrington warns consumers, “If a company tells you for a fee they can improve your credit for you, don’t fall for it. It’s a scam. First of all, it’s against the law for any company to take your money before they improve your credit record.”

When it comes to making those improvements, the BBB warns some scam companies may try one tactic to make it look like they’ve helped. They’ll do a blanket dispute for every blemish on your credit report, so those items will come off. But the solution is only temporary according to Barnett, “It’s lifted for 30 days. But on day 31, it’s back on there if it is a valid blemish on your credit report.”

It’s a fake out of sorts that the scam companies are hoping you’ll fall for. But the truth is the work these companies want big money for is something you could try on your own. All you need to do is get free credit reports from the three reporting agencies. The BBB says errors are common, so you need to check out your report and if you find a mistake, dispute it on your own. That method might save you the money you’d spend for so-called credit repair and help you pay down the bills that will truly help rebuild your credit in the long run.

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!