Foreclosure Prevention -
Reporting FHA Mortgage Fraud
U.S. Department of Housing and Urban Devolvement, Office of the Inspector General, Investigations investigates fraud in two distinct areas:
- Fraud for Housing Illegal actions perpetrated solely by the borrower. The borrower tries to acquire and maintain ownership of a house under false pretenses, making misrepresentations regarding income or employment history to qualify for a loan.
- Fraud for Profit Sometimes referred to as "Industry Insider Fraud". The motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties. There are generally multiple loan transactions with several financial institutions involved.
Typical Fraud Schemes
Where a property is purchased, falsely appraised at a higher value, and then quickly resold.
The 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.
An investor may use a straw buyer (an unqualified buyer), false income documents and false credit reports to obtain a mortgage loan in the straw buyer's name. Subsequent to closing, the straw buyer 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.
Homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure are targeted and led to believe that they can save their homes in exchange for a transfer of the deed and upfront fees.
Straw Buyers (also referred to as the Victim Borrower Scheme)
Unqualified buyers are recruited and convinced through various misrepresentations that they can make easy money through the purchase and resale of a home.
If you suspect FHA mortgage fraud, contact the U.S. Department of Housing and Urban Devolvement, Office of the Inspector General, Investigations, Mid Atlantic District at (410) 962-4502