Borrowers Pay For Mortgage Fraud

Mortgage fraud has become one of the business world’s fastest growing white collar crimes around. While it used to have repercussions for the scammers, borrowers are now starting to feel the burn from fraudulent lending with overpriced houses and interest rates raised to protect lenders. The frauds, which can range from inflated appraisals to using novice real estate investors, usually include the borrower but are often masterminded by people on the inside of the industry. Almost 80% of all mortgage fraud is a result of “fraud for profit,” a case where illegal activities are used to turn a profit on a property. The other 20% consists of “fraud for property” where borrowers mislead lenders about their financial situation in order to purchase more house then they can afford.

While “fraud for property” scammers plan on paying for the loan, they often borrow much more than they can pay, and end up foreclosing on the property. Mortgage fraud costs lenders more than $1 billion in 2005, more than double for the 2004 fiscal year. The lenders are protected in some cases, but overall the costs of these fraudulent cases have to be allotted some where. And that burden is borne by the borrowers. Those who live in neighborhoods where properties have been inflated can be held responsible for higher taxes, or having to live in a neighborhood where multiple properties have been foreclosed on.