If you provide false information on your mortgage application, it constitutes mortgage fraud. Most applicants add a white lie or two on their forms, often because they do not know how serious the issue is, or worse, because their real-estate agent suggested they do so and assured them that there is no harm in doing so. Including false information in your application could lead to your lending institution taking you to courts and demanding an immediate full repayment of the funds borrowed. It could also lead to hundreds of thousands of dollars in fines, FBI inquiries and jail time.
The FBI defines mortgage loan fraud as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.” Following are a few common instances of mortgage fraud:
– Undisclosed kickbacks – if you receive funds from the home seller, for a roof repair or anything else and the lender does not know about it, since it is not in the final contracts, it constitutes fraud.
– Silent second mortgage – a borrower without a down payment may borrow the funds from the seller in exchange for giving the seller a silent second mortgage, which is not recorded and hidden from the lender.
– Falsifying Employment income
– Down payment gifts you will repay – the giver and the recipient, commit loan fraud if the gift is to be repaid. Gifts cannot be repaid
– Inflated purchase price – if there are two purchase contracts and the one with the higher price is submitted to the lender in the hope of getting a better appraisal, it is also mortgage loan fraud.