Loan Fraud – Fraudulent Loans

Fraudulent loans take on many different forms. The victims may be individuals or financial institutions. Fraudulent loan schemes generally prey on vulnerable consumers. The unemployed, those who have bad credit ratings, or those in immediate need of money for emergencies. Here we’re going to take a look at some of the more common forms of fraudulent loans, and how you can avoid becoming a victim, or even accidentally committing fraud yourself.

Loan Fraud - Fraudulent Loans

Mortgage Fraud

Mortgage fraud is the most common form of loan fraud, and the most costly. The victims can be banks or individuals. And sometimes individuals can perpetrate fraud without even knowing it. “Creative financing” is a term that has been used in the mortgage industry for a long time now. Unfortunately, many times it forces the consumer to commit fraud without even realizing it. Here are a few examples of some things that a mortgage applicant may do which would constitute mortgage fraud:

  • Over appraising a property value. Happen to be good friends with an appraiser? Maybe he bumped up your house value by a little bit to help you get a higher selling price. If that’s the case, it’s mortgage fraud.
  • Applying for a “stated income” mortgage? Maybe you exaggerated your income a little bit to help get a lower interest rate. That’s not creative financing, that’s mortgage fraud.

Kickbacks, false deposits, lying about residency, lying about employment, repayment of gifts, and many other common activities may be construed as fraud. Unfortunately, some unscrupulous mortgage brokers looking for a quick buck may actively encourage you to engage in fraud, and even convince you that it’s perfectly legal. According to the FBI, mortgage fraud is defined as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.” If you feel that you may be asked to break the law on your mortgage application, at the very least consult your attorney. Ignorance of the law is no excuse, and mortgage fraud is a federal crime.

Mortgage Fraud By Insiders

The mortgage industry is just as competitive as any other industry, and unfortunately many companies are willing to do whatever it takes to make a profit, even if that means breaking the law. A very common form of mortgage fraud comes from mortgage brokers. Whether it’s encouraging clients to lie on documents, or forging documents without their knowledge, insider fraud is very common.


Other Types Of Fraudulent Loans

Other types of fraudulent loans may include applying for a loan with a fake identity, forging loan documentation, or even posing as a financial institution in order to collect a down payment on an alleged loan, and disappearing after receiving the cash.

Protecting Yourself

First of all, if you’re being encouraged to falsify any information on your loan documents, be wary. Seek legal counseling, because even if you’re “tricked” into committing mortgage fraud, it’s still a very serious crime, and you can be prosecuted. Second, protect your personal information. In order for someone to apply for a fraudulent loan in your name, they need your personal information. Be very cautious about who you give this information out to. It’s also a good idea to keep a close eye on your credit report. If you do fall victim, the sooner you catch the sooner you can prevent yourself from incurring any financial damages.

Five Crucial Documents

The five most crucial documents in the analysis of any loan fraud file are: (1) the HUD-1; (2) the loan application (1003); (3) the loan submission form (1008); (4) the escrow instructions; and (5) the preliminary title report. These few documents often serve as a blueprint of the fraud, showing the trail of money and the identity of the people who stood to gain. Properly analyzing and highlighting these documents will assist your attorney in more effectively representing you, and in developing a plan of attack. The effectiveness of your attorney increases exponentially if he or she can litigate your case, i.e., examine witnesses, conduct depositions, etc., having a complete knowledge of the motivations and involvement of each of the parties.

Recommended Further Reading: Loan Fraud Litigation

Share it

15
Leave a Reply

avatar
15 Comment threads
0 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
15 Comment authors
Talia PouVivian Montalvobrenda lee spicerLoriKirk Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Talia Pou
Guest
Talia Pou

Yeah I’ve just needed a loan from one of these lenders (that may be Iranian or Indian)to help me with some financial things and the very first person that i spoke to told my that they wanted me to get an money voucher of 210.00 with pay pal to prove that i can make a monthly payment with them in order to get a loan from them! That alone sounded fishy!So i proceeded to let them know in a little bit of anger, that it didn’t make since for me to get an loan from them and send them 210… Read more »

Vivian Montalvo
Guest
Vivian Montalvo

What is fray chek and where do I get it?

brenda lee spicer
Guest
brenda lee spicer

How do I find out if Countrywide took advantage of my 73 year old mother. She was on social security when she took out the initial loan. I believe that she refinanced approx. 4 more times. I feel that the loan company took advantage of her and fradulent refinanced. There is no way she could afford the loan that they took out. My address is 3738 falls rd. baltimore, md 21211.. Is there anything I can do. Please help.

Lori
Guest
Lori

I sit here reading these forums and unfortunately I have been trying desperately to also find a loan, I was just scammed by Rockwell Financial group in Minnesota. Has hurt us financially ALOT. Has anyone been able to find a way to get their money back? Their phone and site is down now to no surprise. I have the name and location as to where the money was sent, is there a way we can get them too? Is there anyway I can get my money back, or anyone that can help with suggestions? I am always so careful I… Read more »

Kirk
Guest

They took 862.00 for a 5000.00 loan. the 800 was to go to principal and would delay the first payment of 161.00 until Dec 1. Money was sent to Sevel Spain to a Britta Ergonbech ( a private lender ). The day the loan was to be deposited I recieved a voice mail from the manager Richard that there was a problem with the loan and would require an additional 5 months security payment to secure the loan. Making it a total of $ 1724.00 for a $5000.00 loan. since the business is located in Providence Rhode Island (1 Financial… Read more »

lisa forakis
Guest
lisa forakis

from depositing 60k at Emporiki London (now owned by credir agricole) we have lost everything, shall we say by, bank negligence, the bank manipulated to take 1st charge, by paying a former partner 40k which we knew nothing about in fact an unsecured loan, and then applied a loan to the account ( my husband had signed a loan application form but that was it) the loan application on face said 170k 180 was credited to his account only essentially to pass through. Fax transmissions arrived at the bank (emporiki london) one was for 130k (the signature was scanned from… Read more »

Rex Mackall
Guest

this phony company called fairhaven lending group has just stolen 926.00 from me promising an 8000 dollar loan if i paid the first five months payment in good faith sine my credit wasnt up to par.. please beware and do not send money to canada… you will not get it back.. google the names of these people before believing it is really their name.. THEY DONT EXIST!!! i was preyed on by these people and now face losing my job because i got an advance from my boss for this loan.. i faced losing my job already because of transportation… Read more »

Cheri
Guest
Cheri

I was approved for a secured loan of $8000. Everytime I made a payment a new fee would arise. Finally I was told that this would be a final fee and the funds would be available for me. However when I call to confirm I get a message that the number is not in service. I sent emails and a fax and no one will contact me. What do I do?

hayley
Guest
hayley

Has anybody heard of Zee finance, they have rung me today and offered me a loan but they want an upfront fee of £150 which they said will be put back in my bank with my loan, i cant find ANY reviews about them good or bad? ho do i contact to find out this is for real and not another con?
thanks in advance

John Jr. Loans
Guest

Hey there, understandably however this is right off chosen issue on the other hand at any rate, patient scouting used your website which seeks incredibly sincerely trendy. I am building a new-fangled blogging combined with having problems for it to be stand out, whenever explain to sense an issue our screw it up. Information on how intense has the application to produce your internet site? Was able to a person at all like me minus the come across do so, and thus develop people modify documents without having to endangering information technology each and every time?