There have been a series of abuses in the mortgage industry and criminal prosecutions for mortgage fraud are increasing. Unwary borrowers can become guilty of mortgage fraud. Here are steps you can take to avoid committing mortgage fraud.
1
Do Not Lie
Do not lie on a mortgage application. Answer all of the questions truthfully. If your mortgage broker tells you that "everybody stretches the truth on mortgage applications," do not believe the broker and find somewhere else to get a mortgage. Making false statements on a mortgage application is a crime.
2
Do Not Leave Blanks
Do not leave any blanks on your mortgage application. Some unscrupulous mortgage brokers have been known to fill in blanks with false information to help secure the mortgage. If a particular question does not apply write "N/A" in the blank or draw a line through the blank.
3
Beware of "creative financing"
The term "creative financing" has been over used and frequently is a code for "let's work a scam on the mortgage lender." Be vary wary if a mortgage broker or a real estate agent proposes using "creative financing" to get a loan for which you would not otherwise qualify.
4
Only one HUD-1
There should be only one version of the HUD-1 settlement statement at a closing (although you will probably have to sign multiple copies). If a mortgage broker or closing agents tells you that you have to sign two different versions of a HUD-1 for the closing to take place, there is something wrong, and you should consult an experienced real estate lawyer before proceeding.
5
Do not inflate the purchase price.
Do not participate in any deal in which you inflate the purchase price and the seller gives you the cash you need to make the deal happen.
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