Types of mortgage fraud you need to know about

Mortgage fraud for title

If someone uses your identification, false documents, or stolen identity to change the title on your house, that would qualify as mortgage fraud for title. Mortgage fraud for title is when a fraudster uses your stolen identity and false documents to take out a mortgage on your house. The bank then lends the funds to the fraudster(s) under your name, therefore leaving you to pay off the debt. Fraudsters could also leave you with a mortgage debt you didn’t agree to even if they didn’t change the title of the house. Without your knowing it, they can also take that title.

To prevent mortgage fraud for title, and to ensure everything is in order, you should regularly check your credit rating and the title on your house. If you do become the victim of fraud, you will have to provide evidence that you didn’t authorize the mortgage and the title change.

Mortgage fraud for profit

Mortgage fraud for profit is one of the more complex forms of fraud, typically involving more than one person working together to receive loans for non-existent houses or to inflate the price of a home. Motivated by financial gains, mortgage fraud for profit is usually executed by industry insiders such as: real estate brokers; mortgage brokers; lawyers; title insurers; real estate appraisers; credit agency employees; lenders; and/or outside investors.

Another example of an industry insider that could commit mortgage fraud for profit is a seller or a straw buyer, who makes the purchase for someone else. A straw buyer would usually be approached by someone who cannot get financing due to poor credit, for instance.

For a portion of the profits, a straw buyer could lend their good credit and identity to buy the house. In that case, the real buyer makes the payments and pays the straw buyer for using their credit rating and identity. Usually, the “real buyer” pockets the money and the straw buyer is left with no way to pay for an inflated mortgage on the property—plus the property.