How to Report Mortgage Fraud: Protecting Your Financial Integrity

Dealing with mortgage fraud can be a daunting and stressful experience. It's important to understand the different types of mortgage fraud, gather necessary information, and report the fraud effectively to the appropriate authorities. This guide will walk you through the process, providing a comprehensive approach to addressing mortgage fraud, thereby protecting your financial integrity and the real estate and banking markets.

Understanding Mortgage Fraud

Mortgage fraud is a serious issue that involves both the applicant and the lender. By understanding the types of fraud and their potential impacts, you can take the necessary steps to report them effectively.

Borrower-Initiated Mortgage Fraud

Types: Borrowers may commit fraud with the intent of defaulting or profiting. However, fraud for property is often more of a wishful thinking issue, which still causes significant harm due to the higher risks of default. Common Scams: For-profit mortgage fraud can involve deceptive loan applications, property value inflations, and identity theft. Prevention: Maintain accurate records and regularly review your financial statements to detect any anomalies.

Lender-Initiated Mortgage Fraud

Types: Lenders can commit fraud by inflating property appraisals, altering loan documents, or participating in "don't care" anti-deterrence practices. Common Scams: Appraisal fraud and "air loans" are prevalent among lenders. Prevention: Educate yourself about mortgage lending practices and engage with professionals who can provide independent assessments.

Gathering Information and Documentation

When reporting mortgage fraud, it's crucial to collect and compile all relevant documents to support your case. Here’s how to gather essential information:

Loan Documentation: Pull all documents associated with the loan to build a comprehensive case. Payment History: Determine if the party in question is paying their mortgage. If not, check if the lender will take action based on the status of default. Complaint Forms: Use appropriate government websites such as the FBI, FTC, or HUD for reporting.

For more specific issues, especially in cases involving neighborhood lenders, local law enforcement should be notified as well.

Reporting the Fraud

For-Profit Mortgage Fraud

Identify Scams: Watch out for mortgage relief offers that require upfront fees or promise to prevent foreclosure. Gather Evidence: Collect letters, flyers, and brochures from potential scams and report them to the FTC and your state Attorney General. Fraudulent Appraisals: Have a real estate agent or lawyer run a comparative sales report and consider seeking an independent appraisal for support. Air Loans: Report air loans to the FBI through your local field office or by calling 1-800-CALLFBI.

For-Property Mortgage Fraud

Identify Suspicious Activities: Use questions like "Is someone bragging about outsmarting the bank?" to identify potential fraud. Report Identity Theft: Gather all documents and contact local law enforcement immediately if identity theft is involved. Lender Reporting: Write a letter to the lender detailing your suspicions if you believe fraud was committed on an application, with supporting evidence. Law Enforcement: Make a detailed report to law enforcement if the fraud is significant or involves identity theft.

By following these steps, you can effectively report mortgage fraud, ensuring the integrity of the real estate and banking systems and protecting your own financial status.