Residential Mortgage Application: Spotting Loan Fraud

Committing loan fraud on your residential mortgage application is a federal offense. Loan fraud includes any misrepresentation of information on your application, including small omissions. Loan fraud has a high likelihood of discovery in the underwriting process.

Spotting Loan Fraud in Underwriting

Loan fraud is usually caught during the processing or underwriting phase of a loan. For example, an individual who inflates an annual salary may be able to present one, high paycheck to validate this salary. In the underwriting process, though, the underwriter may will cross reference income information with the IRS reported earnings for all years.

Large-Scale Loan Fraud

Some borrowers are approached by mortgage brokers acting outside of the lender to help them source a mortgage loan. Mortgage brokers operate in a lawful manner for the most part. However, if a broker in any way encourages deceit on a loan application, the broker could be guilty of loan fraud. If you are contacted and encouraged to lie on a mortgage application, you should in turn contact the FBI immediately. Even the smallest lie can result in jail time.

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