Mortgage Scam – Home Mortgage Fraud

Each mortgage scam contains some type of misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase or insure a loan. Mortgage scam is easily practiced particularly where mortgage industry professionals are involved. The true level of mortgage scam is largely unknown because a significant portion of the mortgage industry is void of any mandatory fraud reporting and in addition, mortgage fraud in the secondary market is often under reported. Based on various industry reports and analysis, mortgage scam is pervasive and growing. Mortgage scam can be basically analyzed as:

  • Fraud for Profit – Sometimes referred as “Industry Insider Fraud” and the motive is to falsely inflate the value of the property, issue loans based on fictitious properties or revolve equity. Based on existing approximate reports, eighty percent of all reported mortgage scam losses involve collaboration or collusion by industry insiders
  • Fraud for Housing – An illegal action perpetrated solely by the borrower. This type of mortgage scam is done by a borrower who makes misrepresentations regarding his income or employment history to qualify for a large loan. The motive behind this scam is to acquire and maintain ownership of a house under false pretenses
mortgage scam

Fraud for Housing can not be compared to the scam done by mortgage scam industry professionals which affect the borrowers. Predatory lending usually is targeted towards senior citizens, lower income and challenged credit borrowers. Mortgage lending representatives force borrowers to pay exhaustive loan settlement fees, sub-prime or higher interest rates, and in some cases, unreasonable service fees. The usual result is the borrower defaulting on his mortgage payment and undergoing foreclosure or forced refinancing. Our focus is to recognize the mortgage scam that could happen to us, the borrower.


False or Stolen Identity – A fake identity may be used on the loan application. The applicant may be involved in an identity theft scheme and use someones personal information without the true person’s knowledge.

Inflated Appraisals – An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender. This report inaccurately states an inflated property value.

Silent Second Mortgage – Buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender.

Nominee Loans – The identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee’s name and credit history to apply for a loan.

Equity Skimming – An investor may use a nominee, false income documents, and false credit reports, to obtain a loan in the nominee’s name. Subsequent to closing, the nominee signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place a few months later.

Property Flipping – A property is bought, falsely advertised at a higher value, and then quickly sold. What makes this property illegal is that the appraisal information is fraudulent. The schemes typically involve one or more of the following; fraudulent appraisals, doctored loan documentation and inflated buyers income… Kickbacks to buyers, investors, property and loan brokers, appraisers, title company employees are common in this scheme. A home may be appraised for $100,000 but is actually worth $30,000.

Air Loans – This is a non-existent property loan where there is usually no collateral. A broker invents borrowers and properties, establishes accounts for payments, and maintains custodial accounts for escrows. They may even set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency for verification purposes.

Foreclosure Schemes – Are one of the worst. The loan agents mislead the homeowners into believing that they can save their homes in exchange for a transfer of the deed, usually in the form of a Quit-Claim Deed, and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner without helping to prevent the foreclosure. The victim suffers the loss of the property as well as the up-front fees. Be aware of offers that promise to save homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. If you are near a foreclosure seek a qualified credit counselor or attorney to assist.

Mortgage Scam per e-Mail – Many of the emails imply that the recipient has already been approved for a loan by making a vague statement such as “we are accepting your mortgage application”. Recipients may believe that they are actually being offered a loan. These emails are basically just poorly implemented tricks to get recipients to click on the link provided and fill out a form which in turn will defraud you in one way or another. If enough information is provided, scammers might even be able to steal your identity. A lot of the sites will last only a few days before they are taken down. But new will arise as soon as they are suppressed. Often they consist of just one page containing a form. There is no information about the company offering the service, no privacy policy or a legal document, and no contact options other than the form provided. Often,the form is not secure (https), which is a good indicator that the site is not legitimate. No credible company would expect potential clients to submit information via an unsecured form. Never deal with spammers, regardless of how attractive their offer may seem. If they are unscrupulous enough to send unsolicited email, or allow their affiliates to send unsolicited email, then they have immediately shown themselves to be untrustworthy and you should avoid them at all cost. In general try to avoid the use of online mortgage loans.


  • Understand the terms of your mortgage. Check your information against the information in the loan documents to ensure they are accurate and complete
  • Never sign any a blank document or loan documents that contain blanks. Information that is not approved or signed by you may be added later on
  • Look at written information to include recent comparable sales in the area, and other documents such as tax assessments to verify the value of the property
  • Understand what you are signing and agreeing to. If you do not understand, re-read the documents, or seek assistance from an attorney
  • Do not let anyone convince you to borrow more money than you can afford to repay
  • Do not let anyone persuade you into making a false statement such as overstating your income, the source of your down payment, or the nature and length of your employment
  • Make sure the name on your application matches the name on your identification
  • Review the title history to determine if the property has been sold multiple times within a short period of time. It could mean that this property has been flipped and the value falsely inflated or there may be other problems with this property
  • Get referral for real estate and mortgage professionals. Check the licenses of the industry professionals with state, county, or city regulatory agencies
  • Be aware of cost or loan terms at closing that are not what you have agreed to
  • Do not sign anything you do not understand
  • An outrageous promise of extraordinary profit in a short period of time signals a problem
  • Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques
  • Before purchasing a home, research information about prices of homes in the neighborhood
  • Shop for a lender and compare costs. Beware of lenders who tell you that they are your only chance of getting a loan or owning your own home
  • Beware of “No Money Down” loans. This is a trick used to entice consumers to purchase property that they likely cannot afford or are not qualified to purchase. Be wary of mortgage professionals who falsely alter information to qualify the consumer for the loan. In the end you will be the one who pays
  • Read and carefully review all loan documents signed at closing or prior to closing for accuracy, completeness and omissions
  • Be suspicious if the cost of a home improvement goes up if you accept the contractor’s financing


The best way to avoid mortgage scam is to stop borrowing money anytime, anywhere and anyhow. Once you sign a loan you become a slave who is under contract. Protect your freedom and stay free at any cost. If you do have debts or you have decided to have them in the future, make them low and pay them as soon as you can. Otherwise it is better to limit yourself to the money you actually posses. If you don’t have it, work harder for it, but try and stay free of any debts.

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Todd Runnels
Todd Runnels

I have spent years keeping my credit A-1 and now no one will even talk to us now about getting a good mortgage, this is our dream house that we built and would really like to keep it and with good loan. I guess I was asking Wells Fargo for too much to be a great customer and prompt payer, they would rather jerk people around and get that high interest no matter what. here are the things we are going through with Wells Fargo Financial, very unhappy with and abusive predatory tactics/promises on 02/18/08 we financed our home with… Read more »


my title company change my mortgage and deed after i left the closing


I recently was propositioned by a company for something i believe to be a scam offering me to save my home from forclosure.. upon contacting this company they requested that i give them 2500 dollars so called money back guarantee in order for me to help them… seeing something wrong in this i told them no thank you and hung up on them….believing it to be a scam because people suffering from forclosure can’t even pay thier mortgage yet ..2500 dollars fee to restucture thier loan so how could this be legal? i didn’t fall prey to the scam however… Read more »

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