Mortgage Fraud CausesMortgage Fraud Expert Witness

3 Ways To Spot A Fraudulent Mortgage Broker

Mortgage fraud is a major issue. While there are plenty of reputable mortgage brokers out there, there are some that rely on some pretty shady actions to turn a profit, often at the expense of potential homeowners and lenders.

Knowing how to spot a fraudulent mortgage broker is essential. That way, you can stop fraudsters in their tracks before things get out of hand or so you can pursue litigation to prevent bad actors from getting rich undetected.

Here are 3 ways to spot mortgage broker fraud so people don’t fall victim to this criminal activity ever again:

1. Inaccurate Appraisals

Appraisals are important aspects of any home brokerage transaction as they help lenders and borrowers determine the actual value of a home. But, fraudulent brokers that want to make a profit can easily alter appraisals in their favor.

Some more easily identifiable signs of fraud in the appraisal process include:

  • Appraisal reports that were dated before the sales contract
  • Report photos that were taken from an unusual angle
  • Photographs of homes that have a “For Rent” sign out front
  • Using “comparable homes” that are actually different in size or style
  • Distorting maps to include comparable properties that are well out of the neighborhood
  • An appraisal with a determined property value that just doesn’t fit the market

Any of these signs point to potential inconsistencies within the appraisal process. Brokers that try to modify appraisals often do so to illegally increase the value of a home and their profits, all at the expense of the home buyers and lenders.

2. Inconsistencies With The Mortgage Application

Sometimes, mortgage applications just don’t look right. Although potential buyers do sometimes make honest mistakes on their applications, multiple inconsistencies within these documents should ring some major alarm bells and warrant further investigation.

Here are some key signs of inconsistencies to look out for when reviewing a mortgage application:

Listed employers that don’t actually exist or are inconsistent with the applicant’s job title

  • Applications without a date
  • Unsigned mortgage applications
  • A large gap between the applicant’s income and the price of their potential home
  • The applicant and their employer have the same listed telephone number

While some of these inconsistencies may point toward fraud-for-housing on the part of the mortgage applicant, they could also indicate a mortgage broker that’s involved in an air loan scheme. Since these brokers have to completely invent a fictitious borrower, these fraudulent applications are usually rife with errors.

3. Unusual Sales Contracts

Sales contracts should demonstrate that an actual negotiation process took place for the property in question. However, as part of air loan or straw buyer schemes, fraudulent mortgage brokers will often fabricate or alter a contract to secure a loan.

Keep an eye out for the following when reviewing a sales contract:

  • Exceptionally large real estate commission fees for the location and the brokerage
  • A listed home buyer that’s not the mortgage applicant
  • Earnest money checks that have inconsistent deposit dates
  • Transactions that involve a power-of-attorney

On their own, these features in sales contracts warrant further review. When such unusual sales contracts are combined with appraisals and mortgage applications that are also suspiciously inaccurate or erroneous, a fraudulent mortgage broker may be to blame.