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Mortgage Fraud: Red Flags You Need to Watch Out For

Mortgage Fraud: Red Flags You Need to Watch Out For

Mortgage fraud comes in various shapes and forms.

With mortgage fraud becoming so rampant, it’s vital to know how to spot warning signs. Especially if you are a real estate and financial professionals, investors, and homeowners. Here, we discuss the red flags to look for to protect yourself against common mortgage frauds. 


5 Types of Mortgage Fraud You Need to Watch out For

Avoid costly, time-consuming, and criminal situations by paying close attention to these mortgage fraud warning signs:  

Foreclosure Rescue 

Foreclosure rescue fraud schemes target homeowners who are facing foreclosure. In this scheme, a scammer will offer to prevent foreclosure by paying off your mortgage for a fee. In this case, the mortgage is never paid, and the homeowner loses their property anyway. Red flags for foreclosure rescue fraud schemes include: 

  • – The borrower receives a sale offer that’s greater than the listing price
  • – The borrower says that they are sending mortgage payments to a third-party
  • – If the foreclosure specialist advised the borrower to avoid contact with the servicer

Phony Loan Applications

Most types of mortgage loan frauds involve phony loan applications. Some typical discrepancies, misrepresentation, and loan application fraud include: 

  • – The employer and borrower have the same phone number
  • – Assets are too high for the borrower’s income level
  • – The address of the borrower’s employer is listed as a PO box

Appraisal and Property Fraud

Another common type of mortgage fraud is an appraisal and property fraud. Some red flags of this type of fraud tactic include: 

  • – Inconsistencies are found in the location or type of comparables.
  • – Photos of the property shown in the photos don’t match the description provided in the appraisal.
  • – The property owner listed is different from the seller shown on the sales contract.

Property Flipping Fraud

Property flipping fraud occurs when you buy a property and resell it at a high price after making only a few improvements. Some red flags for illegal property flips include: 

  • – Inflated appraised value
  • – The appraiser often uses other property flips as comparisons
  • – Seller very recently acquired the property title 

Income Fraud

To qualify for a mortgage, a homebuyer must have a certain amount of income. Underemployed buyers may try to inflate or falsify their income by making up revenue sources. To do this, the buyer usually invents an employer and creates false check stubs. 


The Bottom Line

As property prices continue to rise, the frequency of mortgage fraud will likely increase as well. Knowing some of the common types of mortgage fraud schemes, real estate and financial professionals, investors, and homeowners can better protect themselves from losses. 

For trustworthy mortgage help, don’t hesitate to contact our team

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