Most first-time buyers are concerned about landing a mortgage with bad terms. However, there are other dangers you need to get to grips with. Cue mortgage fraud. Let’s dive into this in greater detail.
Is Mortgage Fraud A Real Risk?
In short, yes. A survey conducted by CoreLogic shows that mortgage fraud has drastically increased over the last year.
As things stand, a whopping one in every 109 mortgage applications contained fraud. That’s a 12.4% leap from last year!
What’s Mortgage Fraud?
There are two kinds:
- Fraud for profit
- Fraud for housing
Fraud for profit is when a professional manipulates either a homeowner or a lender for personal gain. Whereas, fraud for housing is when a mortgage applicant lies on their application. Below are a few specific branches of fraud, you need to be aware of.
- Income fraud: where the level and/or source of income declared on a mortgage application is falsified.
- Occupancy fraud: when a mortgage applicant isn’t truthful about the purpose of the property (primary residence, investment opportunity, secondary residence, etc.)
- Identity fraud: The identity of the applicant is stolen and used to obtain a mortgage.
Why’s This Such An Issue Now?
During the recession, the housing market was dominated by refinancing deals rather than fresh mortgages. Then, as the economy got back on its feet, there was an influx in new mortgage applications. Put simply, as the housing market begins to boom, so does the potential for mortgage fraud.
Issues of mortgage fraud mainly stem from misleading information about the applicant’s debts, dodgy down payment sources, and income falsification. If you’re concerned about identity theft, be overly cautious of links and requests in emails, and if someone asks for funds and you’re not comfortable, contact your bank immediately.