When you think of mortgage fraud, you might picture scheming property investors or dishonest bankers behind the crime. In Chicago, we’ve had cases of mortgage fraud involving a former Cook County judge and other examples of real estate financing swindles. But these days, mortgage fraud has a new face – the everyday home buyer.
According to CNBC and the Chicago Tribune, some home buyers who have been frustrated by rising prices and stringent mortgage requirements have turned to fraud to gain loan approval. The most common tactic is to fabricate or exaggerate income. This runs the gamut from stretching the truth, to outright lies about employment status and income levels. Buyers who supply false data are aided by online “services” that produce fake pay stubs and fictitious employment verification.
False income isn’t the only type of mortgage fraud being attempted. CoreLogic reports an uptick in buyers lying about owner-occupancy, and falsifying down payment “gift” letters. While only about 1% of all mortgages are found to have fraudulent info, 2018 has shown a measurable rise in home buyers stretching the truth.
As mortgage underwriting becomes increasingly automated, desperate home buyers might think they have nothing to lose by cheating the system. But even if a home buyer manages to make it through closing using fraudulent info, they’re likely to get caught somewhere down the road. Once mortgage fraud is discovered, the dominoes fall quickly.
Home buyers who intentionally supply false information to obtain a mortgage can face serious legal consequences, such as heavy fines, jail time and court-ordered restitution. The lender also has the right to call the entire note due, since the loan was granted under false information. The resulting acceleration clause would induce foreclosure.
Any deliberate attempt to provide false info to a lender is a crime. If it isn’t true, don’t put it on the mortgage application!
Trustworthy, reputable mortgage lenders will explain mortgage qualifying criteria, and do their best to help you meet it by honest means. If you do find yourself denied for a mortgage, it is not the end of your home buying plans. You might have to step back and improve your credit, save more money, or adjust your home buying strategy, but patience and diligence pay off. It’s far better to have your finances in proper order, than to rush into home buying and lose everything later.
StartingPoint Realty – proudly serving first-time Chicago home buyers!
StartingPoint Realty specializes in serving first-time home buyers throughout Chicago and the Northwest suburbs. We have a network of Chicagoland mortgage lenders, home inspectors, contractors and other professionals to help make your home buying experience a smooth one!
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Ryan Gable Broker/CEO Starting Point Realty
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