Banks Busy Sniffing Out Mortgage Fraud | Print |  E-mail
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Wednesday, 23 May 2012 11:38


Real Estate Reality



By Carl Medford, CRS
Special to the Forum



Back in the “good old days” when money flowed freely and all you had to do to get a loan was to pass the mirror test, lender fraud was rampant.


While there is plenty of blame to go around, and none-stated-income loans being the chief culprits, extra credit goes to loan applicants who, due to ethnicity and a poor command of the English language, couldn’t even read the loan documents. They had to rely on others who were all too often willing to bend things a bit to make the loan work.


The good news: Those days are gone. And, many of the perpetrators are actually in jail — enjoying a well-earned break from the business of generating less-then-honest loan applications.


The bad news: It’s made loans substantially more difficult to obtain and process.


Not willing to be burned again, banks have undergone a steep learning curve. But learn they have. In fact, if anything, they’ve over compensated.


Left to deal with the chaos caused by fraudulent loan applications and consequential collapses, they are going about things very differently than they used to. In the past few years, they’ve worked hard to find potential fraudsters and weed out problems before they hand out a loan. And, if they suspect any foul play, loan applications instantly go from full speed ahead to dead in the water.


It used to be that banks performed only a few fraud checks on a small sampling of loans. Not only have they increased the number and types of checks they perform, they now examine every single loan in detail. According to David Montoya, inspector general at the U.S. Department of Housing and Urban Development, increased scrutiny is the only option they have. “If we let the money go out the door,” he declares, “We’re pretty much chasing the wind.”


So, scrutinize they do. Drawing on extensive web-based databases, they look for information ranging from whether or not you are currently employed, what your salary might be, where you actually live and more. They search for judgments, liens, other properties you might own and the like.


The IRS is even getting into the act by electronically wiring your past tax returns directly to potential lenders.


Bottom line: Don’t try to embellish incomes or hide extra expenses. With so many methods for sniffing out incorrect info, if you try, banks are making sure that the only one ending up burned… will be you.

 


Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley and a licensed general contractor. This article is sponsored by the Central County Marketing Association at www.ccmgtoday.com

 


 

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