Mortgage Fraud by jennyyingdi


									Mortgage Fraud
 Heartland Funding Corporation
 What is Mortgage
  Why Should I Be
Concerned About It?
How Can We Detect
  and Avoid It?
What is Mortgage Fraud?

• Mortgage fraud is defined as material
  misrepresentation – (a) the giving of false
  information or (b) the omission of known
  information that deceives or misleads a
  lender into extending credit beyond the
  limits of what would normally be extended
  if the facts were known.‫‏‬
What is Mortgage Fraud?
Types of Fraud

• Fraud For Profit                         • Fraud For House
  – Fraud for profit schemes are             – A fraud for house scheme generally
    perpetrated for financial benefit          involves relatively few individuals.
  – A fraud for profit schemes generally     – These schemes constitute the
    involves multiple parties to the           majority of mortgage fraud cases.
    transaction                              – Perpetrated for the purpose of
  – Generally results in large loses to        getting the mortgage to obtain the
    the investor                               property
                                             – Specific fraud areas vary according
                                               to the relative qualifying strengths
                                               or weaknesses of the applicant(s)‫‏‬
What Is Mortgage Fraud?
Common Areas of
• Falsification of income and/or   • Undisclosed owner of subject
  employment                         (seller is not in title at time of
• Falsification of credit            application)‫‏‬
• Falsification of assets          • Undisclosed secondary
• Inflated appraised value
                                   • Falsified intent to occupy
• Undisclosed transfers of
  subject and/or comparable        • Falsified applicant identity
  sales                            • Straw borrowers
• Overlooking needed repairs       • Property Flipping
• Stretching value
Why Should I Be Concerned About
Mortgage Fraud?
                •   Despite what you may hear, it's
                    ALWAYS a big deal
                •   The number of suspicious
                    activity reports to the FBI nearly
                    tripled in 2004
                •   Mortgage fraud results in billions of
                    dollars in loses to lenders and
                    investors -You have a vested
                    interest in helping maintain
                •   Missouri is a hot spot for mortgage
                    fraud activity
                •   Heartland Funding has a zero
                    tolerance policy
                •   Preventing and avoiding mortgage
                    fraud is the right thing to do
26 states have significant mortgage fraud problems
Missouri is in the top 10
         Detect And Avoid
         Mortgage Fraud?
• Common Red Flags that may indicate mortgage fraud:
   – Mortgage Application
      • Significant or contradictory changes from handwritten to typed
      • Unsigned or undated application
      • Employer’s address shown only as a post office box
      • Significant or unrealistic commute distance
      • Borrower is downgrading from a larger or more expensive house
      • Loan purpose is cash-out refinance when property was recently
      • Borrower intends to rent or sell current residence with no
      • Buyer currently resides in property
      • Same telephone number for borrower and employer
         Detect And Avoid
         Mortgage Fraud?
• Common Red Flags that may indicate mortgage fraud:
   – Credit Report
      • No credit history (possible use of alias)
      • Invalid Social Security number or variance from that on other
      • Duplicate Social Security number or additional user of Social Security
      • Recently issued Social Security number
      • Liabilities shown on credit report that are not on mortgage application
      • Significant differences between original and new credit report
      • Also Known As (AKA) or Doing Business As (DBA) indicated
        Detect And Avoid
        Mortgage Fraud?
• Common Red Flags that may indicate mortgage fraud:
   – Employment and Income Documentation
      • Employer’s address is a P O Box, the property address, or borrower’s
        current residence
      • Numbers that appear to be “squeezed”
      • Even dollar amount in year-to-date or past-year earnings
      • Employer unable to be contacted
      • Handwritten VOE, pay stubs, or W-2 forms
      • VOE or VOD addressed o a specific individual
      • W-2 form presented is not the employee’s copy
      • Income appears to be out of line with type of employment
      • Tax returns not signed or dated
      • Borrower with substantial cash in bank reporting little or no interest
        income or Borrower reporting substantial income but no cash in bank
          Detect And Avoid
          Mortgage Fraud?
• Common Red Flags that may indicate mortgage fraud:
   – Appraisal
      •   Appraisal ordered by a party to the transaction
      •   Comparable properties are a significant distance from the subject
      •   Occupant shown to be tenant or unknown
      •   Significant appreciation in short period of time
      •   Appraisal indicates transaction is a refinance when it is a purchase
      •   Large positive adjustments made to comparable properties
      •   “For Rent” sign appears in photographs
      •   Appraisal dated before sales contract or application
      •   Owner is someone other than seller shown on sales contract
      •   Prior sales are listed for subject and/or comparables without adequate
Don't Be a Participant or
Facilitator of Mortgage Fraud
• Never pressure an appraiser to do something illegal, unethical, or
  that could result in misrepresentation to the lender or investor
• Never change information or documentation, or omit information that
  may result in a misrepresentation to the lender or investor
• Compile a complete and honest application
• Immediately report potential mortgage fraud or misrepresentations to
  your supervisor
• Review your application and any documentation provided to identify
  and possible red flag situations
• Remind applicants that they are required by law to answer all
  application questions truthfulyand that Heartland Funding employs
  multiple quality control procedures designed to identify mortgage
  fraud and misrepresentations
Helping Borrowers Understand
Their Agreement at Application
        Integrity and

Heartland Funding Corporation

E-mail Ben Robinson

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