Mortgage Insurance Fraud: Make Sure You're Not Committing It

When buying a home, you may be required to purchase personal mortgage insurance; when you do, make sure you're not committing mortgage insurance fraud - and don't know it. Mortgage insurance fraud occurs when you receive a mortgage, using information or documentation that is purposefully inaccurate or untruthful.

How Mortgage Fraud Is Committed

Mortgage insurance fraud is committed: when the borrower or his/her agent provides fraudulent, inaccurate or untruthful information to the home loan lender for the purposes of obtaining a home mortgage loan. Once the lender approves your loan, the lender then will usually purchase a personal mortgage insurance policy to protect their investment.

The insurance company issues a policy based on the fact that it believes the loan was made in good faith, and that all information and documentation related to the loan - was accurate and truthful. If it is not, that constitutes mortgage insurance fraud.

While there are some homeowners that willingly and knowingly provide false or inaccurate information to home loan lenders, for the purposes of obtaining a home mortgage loan. More often than not, it is a greedy mortgage broker or overzealous loan officer that actually commits the fraud. Many times - the homeowner knows nothing of it.

How to Avoid Mortgage Insurance Fraud

When applying for a home mortgage, you may use a mortgage broker. The vast majority of mortgage brokers are ethical and professional in the way they conduct their businesses; however, there are those that are not. These brokers will do almost anything to get home loan applications approved - because, they only get paid if a home loan is approved.

In fact, it is a rather common occurrence. Some unscrupulous mortgage brokers will often encourage potential homebuyers to “fudge” or exaggerate income earnings, debt to income ratios and on hand savings or cash amounts. Some shady mortgage brokers even go so far as to encourage the creation of false documents to support exaggerated claims.

In certain situations, mortgage brokers have been known to supply forged or false documents to potential homebuyers – for a fee. Common types of forged documentation include: forged bank statements, falsified tax returns and forged court documents.

When applying for a home loan, never attempt to provide false information to the lender. While you may be approved for the loan, the consequences will usually catch up with you -- sooner or later. Unscrupulous mortgage brokers and loan officers will attempt to tell you that fudging on your application is not that big a deal. In all reality, you probably won't go to jail for it - but you might. At the very least, your insurance company may cancel your policy. If they do, your home loan may be called, and you may be required to pay off your entire mortgage in a very short period of time. Of course, if you cannot pay off the mortgage, then the lender may foreclose on your home. Therefore, always provide only accurate and truthful information on your home mortgage loan application.

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