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Here's the deal. When you're buying a house, you're making probably the biggest financial commitment of your life. I've been working with borrowers for years at AmeriSave, and I've seen too many people who thought they were being careful still end up victims of fraud schemes. The stress you might feel during the home purchase process is normal, but you absolutely don't need the added nightmare of discovering you've been scammed.
Here's what should give you some peace of mind: mortgage fraud is serious, but you can take real, actionable steps to avoid it. Between you and me, knowledge really is your best defense here.
Mortgage fraud happens when someone deliberately lies about or leaves out information that mortgage underwriters and lenders use to decide whether to fund, purchase, or insure a mortgage loan. And here's where it gets interesting: both borrowers and mortgage professionals can commit fraud.
According to the FBI, mortgage fraud is recognized as a significant criminal problem in the United States, with investigations focusing on schemes perpetrated by individuals acting alone or in collusion with borrowers, loan originators, or real estate professionals.
Fraud for Profit Industry insiders like bank officers, appraisers, mortgage bankers, and real estate agents typically commit this type. According to FDIC research, approximately 80% of all reported fraud losses involve collaboration or collusion by industry insiders. These professionals use their industry knowledge to steal cash and equity from lenders or homeowners.
Fraud for Property This is when borrowers lie or omit information to get loan approval or better loan terms. They might misrepresent their employment status, income, property value, credit situation, or other financial details. Not gonna lie, I understand the desperation that drives this sometimes, especially when you really want that house. But the consequences? They can destroy your financial life.
So I was reviewing the latest data yesterday, and the numbers are pretty eye-opening. According to CoreLogic's Mortgage Application Fraud Risk Index, fraud indicators increased 8.3% year-over-year in Q2 2024, with one in 123 applications showing signs of fraud.
Let me paint you a picture of what's happening right now. Purchase loans show higher fraud risk at 0.9% compared to refinances at 0.58%. Applications for 2-4 unit properties show a 3.5% fraud rate, meaning roughly one in every 27 applications for small multifamily properties contains fraud indicators. As someone licensed in 37 states, I've seen this pattern play out across different markets.
First-time buyers are nearly twice as likely to commit fraud than current mortgage holders. This breaks my heart a little because I know many first-time buyers are just trying to achieve homeownership and don't realize they're making a choice that could land them in federal prison.
The top states for mortgage fraud continue to be New York, Florida, California, Connecticut, and New Jersey. Cases have risen by double digits in some markets: California increased 14.6%, Connecticut jumped 10.8%, and Florida rose 10.2% since mid-2023.
From my years in the industry and based on the FBI's classification of the most common schemes, here's what you need to watch for. This isn't an exhaustive list, and honestly, fraudsters are creative people. Some schemes probably haven't been invented yet, which is a scary thought.
Okay, real talk for a second. Buying, renovating, and reselling property isn't illegal. But flipping becomes fraudulent when a property gets purchased below market value and immediately sold for profit using a corrupt appraiser who inflates the value.
According to FDIC research, property flipping taints property sale databases and presents the illusion of rising property values in neighborhoods where the flipping takes place, which affects everyone's property valuations.
A fraudster buys a property for $150,000, gets a corrupt appraiser to say it's worth $300,000, and sells it to an unsuspecting buyer at that inflated price. The buyer ends up with a home worth half what they paid.
This happens when loan applicants borrow or rent assets from others to make themselves appear more qualified for mortgage financing. You know what drives me crazy? When people think this is a harmless way to qualify. After the mortgage closes, they return the money to whoever they borrowed it from. Here's the reality: this is fraud, plain and simple.
Equity skimming involves investors using a "straw buyer" to purchase property on someone else's behalf. Using false income documents and credit reports, they obtain a mortgage in the straw buyer's name. After closing, the straw buyer transfers the property to the investor via quitclaim deed.
Then the investor doesn't make mortgage payments but instead rents the property until foreclosure occurs several months later, profiting from the rental income. According to U.S. Sentencing Commission data, the median loss for mortgage fraud cases was $371,818 in fiscal year 2021.
Homeowners at risk of defaulting or already in foreclosure get approached by scammers who promise to save their homes. The perpetrators convince homeowners to put the property in a third-party investor's name, then sell the property using a fraudulent appraisal and steal the seller's proceeds.
The FBI documented losses exceeding $76 million from short sale schemes alone, where properties were resold for significant profits through dual closings.
Homeowners are often told they can rent the property for a year and buy it back once their credit improves. But the scammers never make the mortgage payments, and the property ends up in foreclosure anyway. Bottom line? Never share money or information with a third party until you've contacted your mortgage lender or servicer directly.
Scammers obtain financing using an unknowing victim's financial information, often a Social Security number, stolen pay stub, or falsified employment verification. They then get a fraudulent mortgage on a property they don't own or occupy.
Identity fraud increased 5.6% in 2024 and 12% in 2023, according to industry research. Physical documents like bills and checks put you at higher risk because they contain sensitive information. At AmeriSave, we encourage borrowers to move to paperless billing and make digital payments to reduce their identity theft exposure.
This is the part nobody talks about enough. Appraisal fraud might be committed by the appraiser alone or with help from other professionals like builders or mortgage bankers. Sometimes a corrupt appraiser undervalues a property so an investor can purchase it cheap. More often, though, appraisers inflate property values to increase the purchase price and maximize their commission.
The FBI notes that more than half of the mortgage fraud cases they work on involve fraud on the mortgage application itself.
Watch for scammers who ask you to pay fees upfront to receive services, promise to grant you a loan modification without proper documentation, ask you to sign over your property's title or sign papers you don't understand, encourage you to make payments to someone other than your servicer or lender, or tell you to stop making your mortgage payments. If something seems off, it probably is. We never ask borrowers to stop making payments to their servicer.
Short sales happen when you acquire a property below market value or when the sales price is less than the seller's existing mortgage loan balance. Legitimate short sales help both the lender and homeowner avoid foreclosure.
Short sale fraud occurs when scammers approach distressed homeowners with a bogus purchase contract, then obtain the property to do alterations, secure a new loan, and rent the home to a third party. Another version involves fraudsters working with real estate agents or appraisers to offer faulty appraisals to potential sellers or banks, then reselling or refinancing the home at real market value.
This primarily affects the elderly because reverse mortgages are available to those age 62 and older. These loans allow homeowners to borrow money using their property as security, with no monthly mortgage payments required. The loan gets repaid when the borrower no longer lives in the home.
Scammers run foreclosure relief schemes using reverse mortgages, equity theft involving dishonest appraisers and attorneys who inflate values, and house flipping where they use reverse mortgage proceeds to buy another property. And here's my challenge to you: if you have elderly parents or grandparents, talk to them about reverse mortgage fraud. The Department of Veterans Affairs doesn't offer reverse mortgages, despite what scammers might claim.
This happens when borrowers, brokers, or lenders obtain mortgage approval under false pretenses. For example, a loan officer might alter or falsify account statements, purchase and sale agreements, income figures, credit reports, and deposit verification forms.
According to FBI data, there are lies about how much income the borrower makes, where they work, and how much debt they already owe. Occupancy fraud occurs when borrowers state they intend to live in the home when it's actually an investment property.
Occupancy misrepresentation has tripled since 2020, with borrowers falsely claiming investment properties as primary residences to get better interest rates and loan terms.
Mortgage company fraud typically occurs to maximize the lender's profits by misrepresenting clients' financial information. Based on FDIC research, broker-facilitated fraud has surfaced as the most prevalent segment of mortgage fraud nationwide.
When committing fraud for property, borrowers are motivated by the desire to retain their current home or obtain a new one. They believe they're unlikely to be approved for a loan using honest information.
I get it. The pressure to qualify can feel overwhelming. But here's what I tell every borrower I work with: there are legitimate loan programs for almost every situation. At AmeriSave, we offer mortgage loan programs for borrowers with credit scores below 580, alternative documentation for self-employed borrowers, and specialized products like DSCR loans. Being honest about your situation means we can find the right program instead of setting you up for fraud charges.
So I was talking to a borrower yesterday who asked me the most important question: "How do I protect myself?" Here's what actually works.
Start by using an attorney to review all legal paperwork. This ensures you understand everything you're signing. Real estate attorneys are well-versed in these transactions and can recognize potential red flags. When I was assigned to onboard and train approximately 70 people from a closed Cleveland office, one of the first things I taught them was to encourage borrowers to use attorneys. In my years of working with borrowers across 37 states, I've seen attorneys catch fraud schemes that everyone else missed.
Check references and referrals of all participating parties. Research real estate brokers and loan officers thoroughly. Look online for reviews and references. When in doubt, get referrals from trusted friends or family members. You can also check licensing status through your state's regulatory agency. At AmeriSave, all our loan officers are properly licensed and we encourage borrowers to verify this themselves.
Research and verify the property's title history. A title search confirms who owns the property you want to buy and reveals any property debts you need to know about. This includes unpaid property taxes, homeowners association fees, and bills for home improvements. According to the Consumer Financial Protection Bureau, title searches are a crucial protection against fraud.
Review all final loan documents to ensure the information is correct. The FBI specifically warns borrowers to carefully review mortgage applications and all loan documents before signing to make sure they are complete and accurate. Don't rush through closing. If something doesn't look right, speak up. Our team builds in time for borrowers to review documents thoroughly.
Review the property's tax assessments to verify the assessed value. The assessed value is the property's determined value based on sales of similar homes and home inspection. Doing your own research helps ensure you have accurate insight into the home's value so you won't pay more than it's worth.
Be wary of deals that seem too good to be true. If someone's offering you a way to qualify that seems like it's bending the rules, it probably is. Transaction fraud rose 4.9% in 2024, often involving falsified down payments or buyer intentions.
Never stop making mortgage payments unless directly instructed by your servicer. Any third party telling you to stop payments is running a scam. Period.
If you think you're a victim of mortgage fraud, act immediately. Report it to relevant federal agencies, including your local police, state and local consumer protection agencies, and your mortgage lender. In some situations, your lender may require a police report to access the documents the fraudsters provided and aid in the investigation.
You can report your experience to the Internet Crime Complaint Center, a division of the FBI, the Federal Trade Commission, and the Consumer Financial Protection Bureau. According to 2024 data, 38% of fraud reports involved consumers who actually lost money, up from 27% in 2023. This means more people are suffering real financial losses, making quick reporting even more critical.
Because mortgage fraud is a serious offense, it carries serious legal consequences. According to the U.S. Sentencing Commission, in fiscal year 2021, there were 58 mortgage fraud offenders sentenced in the federal system. The data shows that 70.7% of offenders were men, with a racial breakdown of 43.1% White, 27.6% Black, 20.7% Hispanic, and 8.6% Other. The average offender was 49 years old, and 98.3% were U.S. citizens. Perhaps most surprisingly, 82.8% of offenders had little or no prior criminal history.
Under federal and state laws, a mortgage fraud conviction can result in up to 30 years in federal prison and up to $1 million in fines.
The median loss was $371,818. In terms of loss distribution, 37.7% of cases involved losses under $250,000, while 13.2% exceeded $3.5 million. Fraud attempts cost lenders 4.5 times the original transaction value in total losses.
If fraud is discovered post-loan, borrowers may face foreclosure or immediate repayment demands. Your financial life can be destroyed, and you'll have a federal conviction on your record.
The mortgage industry is evolving rapidly, with technology playing both positive and negative roles in fraud prevention and perpetration.
According to industry research, fintech lenders now hold 17% of the mortgage market in 2025, up from just 2% in 2010. Meanwhile, 30% of mortgage lenders adopted or tried AI software in 2024, with expectations that 55% will use AI by the end of 2025.
This technological shift creates both opportunities and vulnerabilities. Digital platforms like the ones we use at AmeriSave can catch fraud patterns humans might miss, but they also create new avenues for sophisticated fraud schemes.
FDIC data shows that Suspicious Activity Reports related to mortgage fraud increased sharply in the 2000s. There were 46,717 SARs filed in FY 2007, a 31% increase from the year before. In FY 2008, filings surged to 63,713, an additional 36% increase. From 1997 to 2005, SARs rose 1,411%, with FY 2008 losses exceeding $1.4 billion.
As of Q4 2024, there's $12.61 trillion in total outstanding mortgage debt in the U.S., representing 69.9% of U.S. consumer debt. While only 0.70% of mortgage debt is considered seriously delinquent, there were 174,100 consumers with a new foreclosure on their credit report through 2024.
American households held $34.8 trillion in total real estate equity in Q4 2024. With stakes this high, it's no wonder fraud remains a persistent problem.
As someone who's worked with countless first-time buyers, I know the process can feel overwhelming. You're more vulnerable to fraud because you don't know what's normal. The data backs this up: first-time buyers are nearly twice as likely to commit fraud than current mortgage holders.
My advice? Take your time. Ask questions. If you don't understand something, say so. We specialize in walking first-time buyers through every step, and we'd rather spend extra time explaining than have you make a choice you'll regret.
Applications for 2-4 unit properties show the highest fraud rates at 3.5%. If you're buying investment property, be extra vigilant about everyone involved in the transaction. Be honest about your intention to use the property as an investment. Occupancy fraud might get you a better interest rate initially, but it's federal fraud that can cost you everything.
Self-employed borrowers face unique challenges in documenting income, which makes them tempting targets for loan officers who offer to "help" by inflating income figures. Don't do it. AmeriSave offers bank statement programs and other alternative documentation loans specifically designed for self-employed borrowers.
Now that you have the tools to recognize mortgage fraud, you have the power to spot when a scam might occur. Understanding why people and entities commit mortgage fraud gives you insight into the motivations behind these schemes.
To ensure your own safety and success, hire a real estate attorney to review all legal paperwork prior to closing, check references and referrals for all parties involved, research title history thoroughly, review all final loan documents carefully, verify tax assessments independently, and trust your instincts when something seems off.
You don't need to go it alone. At AmeriSave, we're committed to transparent, honest lending practices. Our loan officers are trained to identify red flags and protect borrowers from fraud schemes.
With mortgage fraud rates increasing 8.3% year-over-year and geographic hotspots showing double-digit increases, staying vigilant has never been more important. But don't let fear paralyze you. Armed with knowledge and working with reputable professionals, you can navigate the home buying process safely and successfully.
Application fraud remains the most prevalent type, with the FBI reporting that more than half of their mortgage fraud cases involve misrepresentation on the mortgage application itself. This includes lies about income, employment, debt obligations, and property occupancy. According to CoreLogic's 2024 data, one in 123 applications shows fraud indicators, with occupancy misrepresentation tripling since 2020. Income fraud, employment fraud, and asset misrepresentation are the most common schemes because they're easier for borrowers to attempt without insider assistance. The schemes generating the largest financial losses typically involve industry insiders and property flipping, where corrupt appraisers collude with other professionals to inflate property values.
Red flags include pressure to leave blank spaces on applications that the broker will "fill in later," suggestions to overstate your income or assets, requests to sign documents you haven't had time to review, offers to falsify employment or create fake pay stubs, unusual changes between your initial application and final loan documents, or pressure to lie about your intended occupancy. FDIC research shows that approximately 80% of all reported fraud losses involve collaboration by industry insiders. Trust your instincts. If something feels wrong, it probably is. Legitimate lenders will never ask you to misrepresent information. We have programs for various credit and income situations, so there's no reason to lie.
Yes, absolutely. Mortgage fraud is a federal crime that can result in up to 30 years in federal prison and up to $1 million in fines. According to U.S. Sentencing Commission data from fiscal year 2021, borrowers who commit fraud face serious consequences regardless of their prior criminal history. The data shows that 82.8% of offenders had little or no prior criminal history, meaning that first-time offenders still receive significant sentences. The median loss per case is $371,818, and 13.2% of cases involve losses exceeding $3.5 million. Even if you think you're just stretching the truth to qualify for a home you believe you can afford, federal prosecutors see it as fraud.
Contact your mortgage lender immediately and explain the situation. If you were a victim of fraud committed by others, report it to the FBI's Internet Crime Complaint Center, the Federal Trade Commission, and the Consumer Financial Protection Bureau. Gather all documentation related to your loan, including your application, disclosures, closing documents, and communications with the parties involved. If you're concerned you might face criminal liability, consult with a criminal defense attorney who specializes in mortgage fraud before speaking to authorities. According to 2024 data, 38% of fraud reports involve consumers who lost money, and losses often exceed the original transaction value by 4.5 times.
Yes. According to CoreLogic data, the top five states for mortgage fraud are New York, Florida, California, Connecticut, and New Jersey. Some states have seen dramatic increases since mid-2023, with California rising 14.6%, Connecticut increasing 10.8%, and Florida growing 10.2%. These geographic concentrations exist because of factors like high property values, active real estate markets, complex transactions, and sophisticated fraud networks. However, mortgage fraud occurs in every state. Even in lower-risk states, you need to remain vigilant. The fraud schemes are the same nationwide, only the frequency varies.
Reverse mortgages are legitimate products available to homeowners age 62 and older that allow borrowing against home equity without monthly payments. Scammers target elderly homeowners through foreclosure scams that promise to save homes by taking out a reverse mortgage, then pocket the proceeds. Equity theft scams involve dishonest professionals who inflate appraisals to extract maximum equity. House flipping scams use reverse mortgage proceeds to purchase another property that benefits the scammer. FBI data shows losses exceeding $76 million from short sale and foreclosure-related schemes, with many targeting vulnerable elderly homeowners.
Property flipping fraud creates artificial price inflation that harms entire neighborhoods. When corrupt appraisers inflate values and properties sell at fraudulent prices, those inflated sales become "comparables" in property databases. This taints future appraisals, causing other homes to be valued higher than their true worth. Legitimate buyers end up paying inflated prices based on fraudulent comparables. When the fraud is discovered or market corrections occur, property values crash, leaving entire neighborhoods with underwater mortgages. According to FDIC research, this creates a cascading effect where homeowners who paid fair prices find themselves unable to refinance or sell.
Yes, you have the right to withdraw your application at any time before closing. If you suspect fraud, contact the lender's compliance department immediately and put your concerns in writing. Document everything, including dates, names, and specific actions that raised red flags. Request copies of all documents related to your application. After withdrawing, report your suspicions to the state licensing authority for mortgage professionals, the Consumer Financial Protection Bureau, and potentially the FBI if significant fraud is involved. Choose a different lender and start fresh with complete honesty about your financial situation.
Before signing your application, carefully review every number and piece of information. Your income should exactly match your pay stubs, W-2s, or tax returns. Your employer information should be current and accurate. Your debt obligations should include all credit cards, car loans, student loans, and other mortgages. Your assets should reflect actual account balances you can verify with bank statements. The FBI specifically warns borrowers to review applications to ensure they're complete and accurate before signing. If your loan officer enters information that doesn't match your documents, stop the process immediately.
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