Mortgage fraud involves a loan approval based on false statements or omissions. It can also involve getting some other kind of improper advantage from a lender through false statements — such as being allowed to make a reduced loan payoff, or make easier payments.
Mortgage applicants can commit fraud. So can home sellers. So can banks, appraisers, or insurers. Indications of fraud are present in about one of every 120 mortgages.
Loss of reputation, fines, prosecution and prison sentences are the potential consequences of mortgage fraud.
What’s a closing scam? Consider the Colorado home buyer who, a few weeks back, opened an email from the title company. It contained precise instructions for wiring the closing money. The amount requested — about $80,000 — matched the amount the title company had already discussed. Everything looked legit.
Two days later, the title company was requesting the money.
Why hadn’t it been received? Because those wiring instructions weren’t from the
title company after all. Criminals had insinuated themselves into the company’s
email accounts, impersonated the title agent, and diverted the funds.
When a buyer is stung by fraud, money is hard to get back, says the American Land Title Association (ALTA). This buyer was fortunate. Redfin’s Title Forward escrow and settlement subsidiary sprang into action. Title Forward brought in CertifID Funds Recovery Services and the Secret Service. The buyer recovered the 80K.
According to the Federal Trade Commission, tech-savvy
folks aged 40 and under are far from immune to scams and frauds. And most scams
that hook them begin in an email. And the coronavirus
economy is creating even more opportunities for fraud risk.
A bogus email can appear to be a message from an ecommerce or
business site, or even from the government. Millennials are twice as likely as
people age 40 and older to report falling for a scam while browsing messages or
social media posts and clicking on one of the advertisements. There are phony giveaways,
the sale of tickets to fake events, and undelivered or counterfeit items. Young
adults are also the targets of education, employment, and investment scams.
Some of these tricks can be life-changing. While online
shopping fraud might involve just a few hundred dollars or less, millennials
also face real estate scams, such as organized wire fraud and mortgage relief
Some years back, the state of Georgia, under the Georgia Code (GA § 44-2-43), made stealing houses by recording fraudulent or counterfeit real estate deeds a felony, incurring 1-10 years in prison. Witnesses who help perpetrate Georgia deed fraud are subject to the same potential penalties.
Georgia is not alone in its resolve. The FBI reports that
real estate fraud ranks among the fastest-growing U.S. crime categories. Now,
laws are catching up to the fraudsters, deed recorders are starting to alert
people to filings on their homes, and cities are helping people confront the
Evelio and Milagros Esteban are in their 70s and they’ve been homeowners for years. But recently they ran into trouble paying their mortgage. That was when they mistakenly transferred their home deed to another Miami resident, who offered to help them rent out their home. Thinking they were signing a Section 8 housing application — which would help them rent out space affordably to low-income people — they in fact signed a quitclaim deed.
Well-known schemes are being repackaged for the time of COVID-19. Here’s an overview of how real estate fraudsters are approaching their targets — and how to avoid becoming one.
Scams flare up during natural disasters and financial crises,
so we can expect a spike in deed fraud in 2020 and beyond. Battered by the
pandemic, facing snowballing debts and possible defaults, many people are now
considering risks they would have rejected in the past. Deed fraudsters can be
counted on in times like these to aggressively seek new opportunities.
Any wiring directions or changes to money transfer requests over
the phone or by email should arouse suspicion today. Rather than act or answer,
recipients should call the company and deal with a real person. And rather than
use phone numbers supplied in messages, recipients should take the extra step
of visiting the company’s website, copying the published number, and calling
that number. Personal details should be volunteered only after the identity of
the party making the request if verified, or by physically going to the
Of course, COVID-19 itself is making in-person meetings less
possible or at least less palatable. Part of the fraud risk involves the way
online transmission of our personal and financial data can be so easily and rapidly
deeds show up commonly in fraudulent real estate transactions. This type of
deed fraud can impact elderly people, buyers purchasing real estate from
strangers without warranty, renters who are paying someone who is not a
legitimate owner, and anyone involved who might buy, sell, or own property.
examine how it happens and how to detect it.