Mortgage Broker Fraud

Mortgage broker fraud is mainly prevalent in the subprime market. It doesn’t imply that the higher or the middle strata of the mortgage market are fully devoid of any such fraudulent activities. Earlier, taking out a mortgage was easy and it meant that you have a 30 year time period to repay the loan. There were no hiccups on the way, if not many; at least they were lesser in number. The mortgage market has changed over the years.

Competition has become tougher and it is practically a situation where the fittest survives the longest. Consumers are being made aware of their rights. However, it turns out to be that if they are aware of the norms and guidelines, consumers may not know all the options.

Less aware borrowers are taken advantage of. They tend to get exploited and believe whatever they are made to believe. Majority of the cases involving mortgage fraud is performed by the brokers. Mortgage broker fraud is not uncommon in the mortgage industry.

In subprime lending, brokers convince you to forge documents or inflate your income so that you can qualify for a mortgage loan. The lender may or may not know about the fraud. As per definition of a mortgage fraud, any information that is misrepresented, held back or falsified can be referred to as mortgage fraud. In the recent subprime mortgage crisis, lenders approved loans to consumers who didn’t qualify for one.

Instances of mortgage broker fraud

You may be wondering that the broker you have hired has been in business for quite sometime, so he is absolutely honest. In fact, it can turn out that he is a bigger crook. Staying in business at a stretch doesn’t guarantee honesty always. The 3 incidents below exemplify instances of mortgage broker fraud.

1. A mortgage broker in Pennsylvania was sent behind the bars for 30 years. He was accused of misappropriating funds and misleading about 800 borrowers.

2. A property appraiser residing in Kansas City was sentenced to 20 years in jail. He was also asked to pay a fine of USD$500,000.

3. A mortgage broker was recently sentenced to 4 years imprisonment for misappropriating real estate funds worth USD$2.3 million. He is also required to pay a fine of USD$646,000 as compensation to the banks that were fraud victims.

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