You might not think that mortgage fraud and hurricanes have much in common. But if you get caught in a mortgage fraud, it could end up being the biggest hurricane you’ve ever seen.
There have been several stories recently in the news about mortgage fraud. This has been a long-running issue in the housing industry and now the Justice Department is getting serious about investigating.
But what is mortgage fraud? Mortgage fraud or mortgage scams are committed when someone who is involved in the process of obtaining a mortgage loan from a lender is deliberately deceitful and fraudulently misrepresents information that the lender relies upon when they agree to fund, insure and/or mortgage the property.
Frequently there is more than one party to a mortgage fraud or scam, among them, buyers or sellers of residential property; buyers or sellers of commercial property; property investors; real estate agents; closing attorneys; property appraisers; escrow agents; home repair companies; and mortgage brokers.
Since mortgage rates have increased, buyers are motivated to get the best rate possible. Lenders typically offer better terms on mortgage rates for a primary residence with a higher mortgage ratio for a primary residence rather than a second home. For example, the down payment for a primary residence can be as low as 3% to 5%, compared to 10% to 20% for a second home and even higher for investment properties.
Many homeowners commit mortgage fraud simply to ensure they are able to purchase the property they want, by misrepresenting, omitting or otherwise telling lies about their financial information to qualify for a loan.
A term called “asset rental” becomes mortgage fraud when an applicant for a loan rents assets from another person or entity. Borrowing these assets is meant to inflate the borrower’s worth just long enough for them to be approved for the loan. Once approved, the assets are returned to whomever or from wherever they were received.
Inflating appraisals is another fraud common in an increasing equity market. The appraisal is inflated to make the property value appear more than it actually is, tricking the lender into approving a larger mortgage than appropriate.
We are dead center in hurricane season and in Cortez where I live, we have had more than our share of hurricanes and flooding since last year. The fishing village and businesses along Cortez Road including Slicker’s and Foxy’s in particular have suffered. Now that they are back in business, let’s hope they won’t be hit again. We need small businesses and the restaurants in the village to continue the way of life that makes this area unique and rare in Florida.
On a personal note, the condos where I live on the Cortez peninsula also experienced 4 feet of water in the first event and multiple tornadoes in the second event. We lost about half our landscaping and had over five units that incurred so much damage they were unlivable for months. The expense to rebuild mostly came out of resident’s personal funds or association funds. Another reminder to homeowners is that insurance rarely covers all storm related repairs.
No one wants to live through that again, so stay safe and be smart.
