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Florida’s Mortgage & Loan Service’s
Policy on Fraud
We do not condone or allow any borrower(s), loan officer(s), seller(s),
real estate agent(s), appraiser(s) or anyone else involved in a
transaction with us to do business with us or for us to lend to them or
their respective party that engages in fraud and/or any fraudulent
business practices. We define fraud as the deliberate & willful
deception for unlawful gain.
There are several schemes we are on the lookout to avoid and for our
customers and business partners to avoid & detect.
Here are some of a
few that are popular right now:
1. Air
Loans – There is
usually no collateral or asset to secure the mortgage or loan to. The
property is made up and non-existent. Usually it is collaborated with an
appraiser. In other instances a home is parked temporarily and made to
look permanent and after the appraisal is completed it is removed and
taken away.
2. Builder
Bailout – These
schemes usually happen at the end of a cycle of housing growth. This
entails the use of fabricated and inflated strawbuyers and appraisals to
obtain excessive financing on incomplete homes.
3. Backwards
Application – Not
to be confused with reverse mortgages. This occurs with documentation
fraud to fit a specific program or loan criteria to qualify and get an
approval or commitment on a loan; for which, on the borrower(s) own
merits do(es) not qualify. Typically income or assets are inflated or
deflated or manufactured from knowledge of the loan program’s
guidelines.
4. Chunking
– Unwitting investors are encouraged to obtain a loan or mortgage on
inflated and dilapidated properties. Investors later realize that the
properties are in a very poor condition and no rents can be obtained;
the investors’ equity and investment is depleted. Often characterized
by “get rich quick” schemes.
5. Churning
– Also called
“predatory lending”, entails excessive or unnecessary refinancing
without causing any benefit to the borrower(s).
6. Equity
Skimming –
Assigning title to another individual without any financial benefit to
the homeowner and usually without their knowledge. This is outright
stealing from disadvantaged borrowers and homeowners.
7. Flip
Transactions –
These can be legitimate but they have been fraudulent when repairs and
renovations are not completed. A flip occurs when a property is bought
in poor condition for a low price and sells in a short time with
renovations and repairs.
8. Identity
Theft – An
individual portrays himself or herself as another individual through
forged or stolen documents. Consumers and professionals are the victims
of identity theft.
9. Identity
Fraud – Also called
altered identity fraud occurs when an individual creates a new identity
or alters their own information to hide or conceal bad credit or
information regarding their past.
10.Strawbuyers –
Individuals who willingly
allow others use of their credit and/or identity to secure financing
with no intent to repay. They usually think that others will later be
obligated to repay when in fact the third party has no intentions of
repayment. This is the most difficult form of fraud to detect and
pursue. Professionals in the real estate industry as a whole must be
vigilant in detecting this type of fraud early in the process.
Fraudulent lending and
fraudulent homeownership in the real estate industry as a whole damages
our communities in more ways than one. There is of course the economic
impact, but it also affects the health and safety of neighborhoods.
Economic impact is heard daily on the media and press, foreclosures and
default as a result of fraud cause neighborhood home values to plummet
and stagnate. The health impact can be seen through the stress of those
who were defrauded and the remaining neighbors in the community who bear
the scars of this violation of the law and order and our quality of life
suffers as well. Neighborhood safety is also affected by increase in
crime and the chemistry of the neighborhood becomes distrustful
and fearful.
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