Fraudsters are preying on individuals and institutions in our community. Mortgage fraud schemes are particularly resilient, and adapt to economic changes and modifications in lending practices. The recent increases in real estate prices have made mortgage fraud that much more lucrative to criminals.

Mortgage fraud is a material misstatement, misrepresentation, or omission relied on by an underwriter or lender to fund, purchase, or insure a loan. Prevalent mortgage fraud schemes include loan origination, foreclosure rescue, real estate investment, equity skimming, short sale, illegal property flipping, title/escrow/settlement fraud, commercial loans, and builder bailout schemes. Home equity line of credit, reverse mortgage fraud, and loan modification are also of rising concern.

Mortgage fraud perpetrators include licensed/registered and non-licensed/registered mortgage brokers, lenders appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives. Perpetrators target individual and institutional victims across demographics and income levels who can be exploited, either online or in person.

Fraud may also occur during a legitimate transaction, with perpetrators using social engineering or technology tools to unlawfully gain access to e-mail or bank accounts of individuals or institutions. With access, perpetrators can assume the identity of a buyer, seller, investor, or title agency personnel to redirect funds into bank accounts under criminal control.

The FBI works closely with financial institutions, lenders, and industry associations to track, investigate, and hold perpetrators accountable. In addition, public-private partnerships provide an opportunity to educate the community on rising trends and how to protect oneself from becoming a victim.

Mortgage Fraud is punishable by up to 30 years in federal prison and a $1,000,000 fine. It is illegal for a person to make any false statement regarding income, assets, debt, or matters of identification, or to willfully overvalue any land or property in a loan and credit application for the purpose of influencing in any way the action of a financial institution.

What should homeowners and investors do to avoid these scams?

• Get referrals for real estate and mortgage professionals. Check the licenses of the industry professionals with state, county, or city regulatory agencies.
• If it sounds too good to be true, it probably is. Promises of big profits in a small amount of time are signals of concern.
• Be wary of unsolicited contacts and high-pressure sales online or over the phone.
• Understand what you are signing and agreeing to. Make sure the name(s) on your application matches the name(s) on your identification. If you do not understand, re-read the documents, or seek assistance from an attorney.
• Review the title history to determine if a property has been sold multiple times within a short period. Multiple sales could indicate falsely inflated home values.
• Know and understand the terms of your mortgage, refinance, line of credit, or investment. Check your terms against the transaction document you sign.
• Never sign any transaction or loan documents containing blanks or amounts that you have not previously agreed to. This may leave you vulnerable to fraud.
• To prevent identity theft, periodically review your credit report to assure accuracy, and consider freezing your credit report to prevent unauthorized loans.
• Maintain the security of your e-mail, bank, and cell phone accounts with strong passwords and two-factor authentication to prevent unauthorized access and fund transfers. Don’t share your passwords, social security number, or other personal information through channels that are not secure.

If you believe you have been victim of mortgage fraud, or know someone who you suspect is perpetrating mortgage fraud, please contact the FBI Denver Field Office at 303-629-7171 or file a report at tips.fbi.gov.