Avoid Being a Victim of Mortgage Fraud
Just this week a federal judge sentenced a former Auburn attorney to nearly four years in prison for mortgage fraud. James Boyd Douglas Jr. handled mortgage refinancings and real estate closings and was found guilty of embezzling $2.3 million from clients.
An Atlanta area woman and her brother ran a real estate scam in Baldwin County and was sentenced to 18 months in prison and ordered to pay more than $1.6 million to the victims.
Unfortunately, you’ll find fraud in every industry and the mortgage industry is no different. Although it’s only a very small percentage of real estate participants that perpetrate fraud, it’s still critical to protect yourself.
Allegations of fraud are taken very seriously and are investigated by the FBI, which defines mortgage fraud as “a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan.”
There are two types of fraud: fraud for property, which involves applicants that embellish their incomes or conceal their debt to qualify for a loan. Although this is fraud because they have signed documents with deceptive information, the intention of these people is usually to repay the loan.
The second type is the kind that the consumer has to be aware of: fraud for profit. This type of fraud generally involves misrepresentations on appraisals, multiple loans and schemes to deceive lenders or borrowers.
Here are some steps from an FBI advisory on how you can avoid becoming a victim of mortgage fraud:
• Get referrals for real estate and mortgage professionals when you want to buy or sell a home. Then check them out thoroughly with state, county or city regulatory agencies. In a previous column we addressed the need to check lenders with the Nationwide Mortgage Licensing System.
• Do your own research into what other homes in the neighborhood have sold for. You can also research recent tax assessments.
• Beware of “no money down loans.” These can be a sign that you are being enticed to buy a home you can’t really afford.
• Don’t let anyone talk you into making a false statement on your loan application. Don’t lie about your income, where the down payment is coming from or the amount of debt you have. Just remember this statement from the FBI:
“Mortgage Fraud is investigated by the Federal Bureau of Investigation and is punishable by up to 30 years in federal prison or $1,000,000 fine, or both. It is illegal for a person to make any false statement regarding income, assets, debt, or matters of identification, or to willfully overvalue any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution.”
• Never sign a blank document or a document containing blank lines. Review all the loan documents. If you don’t understand what you are signing, get an attorney to review and explain them to you.
— Kathy Gyselinck
Remember, just because someone seems like a nice guy or goes to your church, doesn’t mean you should do business with him.