After the housing market collapse, property values fell more than 30 percent in some areas. That left countless homeowners underwater on their mortgages. As a result, some states became hotbeds for mortgage fraud.
People fall for many different schemes every year. While you may be asking yourself how people come to trust these frauds in the first place, there is no one answer. However, most have run out of options and outlandish promises can look very appealing. That is even more likely if it means avoiding foreclosure.
Overall mortgage fraud activity remained relatively unchanged at the beginning of 2012, according to an index from MortgageDailyNews.com. This index was at 1,151 out of 3,000. Although this is lower than peak levels, it is still well above pre-recession numbers.
“Activity has been fairly consistent as smaller mortgage bankers hit with repurchases continue to uncover fraud committed during the housing boom years,” said Mortgage Daily founder and publisher Sam Garcia.
Florida and California were the most common states for fraud. Lenders in Florida reported $260 million in losses during the first quarter. Fraudulent activity in California totaled roughly $208 million.
However, levels were nearly unchanged from the previous report. That could be an indicator that government efforts to curb fraud are helping.
How is the government helping?
In President Barack Obama’s most recent State of the Union Address, he announced a plan to create a special unit to combat mortgage fraud. This was a vast effort using people from many agencies.
The President said the new unit should hold criminals accountable and provide assistance to those impacted. However, there is only so much the government can do. It is up to a homeowner to be the first line of defense in the fight against mortgage fraud.
How to avoid mortgage fraud
Before you invest your trust, do your homework, recommends the Federal Bureau of Investigation. Whether it is a mortgage lender or real estate agent, get referrals and see if they carry a valid license for your state.
While most are honest people, it just takes one to ruin your finances. It does not matter if you are familiar with the industry, looking to refinance or a first-time homebuyer. If you are not careful, you can quickly become a victim.
Look out for gimmicks
If a deal seems too good to be true, it probably is. Be aware of gimmicks. Many frauds start by offering services with no money down, but then spiral out of control.
Fraudsters often use these to entice borrowers into doing business with them, says the FBI.
By doing a little digging, you can get an idea of a company’s (and their offers) reputability in advance. Sites such as the Better Business Bureau and the National Association of Mortgage Bankers can provide an idea on their background, while real estate sites like Zillow real customer testimonials and experiences. A little homework up front can help keep you in your home for the long haul!
Never make false statements or sign blank documents
A real mortgage professional will never ask you to lie on a loan application. If the person you are dealing with asks you to lie, it is a good sign that you should back away. You could be just as responsible for the crime if you go along.
Make sure to go over every document you sign and ensure all the information is correct. If you do not understand everything you are agreeing to, you should probably ask a lawyer who specializes in the real estate industry.
Freedom Mortgage is a leading lender in all 50 states and is eager to assist you in qualifying for a mortgage. Checking out Freedom’s home mortgage rate calculator is just a stepping stone on your journey to becoming a homeowner.