Mortgage Fraud

As defined by the Federal Bureau of Investigation, mortgage fraud is a crime characterized by some type of material misstatement, misrepresentation, or omission on a loan which is then relied upon by a lender. 

There are two distinct areas of mortgage fraud—fraud for profit and fraud for housing. Click on the flash cards to read more.

  • Fraud for Profit - Elaborate schemes usually involving multiple loans and parties to illicit proceeds. 

  • Fraud for Housing - Usually committed by a Borrower to obtain housing

Actions of Mortgage Fraud

  • misrepresentation of income or employment, credit, assets, occupancy (reverse occupancy), property value

  • undisclosed liabilities

  • identity theft and/or Social Security number discrepancy

  • property flips based on inflated appraisals or other false characteristics

  • misrepresentation of property characteristics

  • mishandling of escrow funds

  • diversion of sales proceeds

other actions that constitute fraud

  • Any dishonest or fraudulent act

  • Misappropriation of funds, securities, supplies, or other Company assets

  • Impropriety in the handling or reporting of money or financial transactions

  • Disclosing confidential and proprietary information to outside parties

  • Disclosing to other persons confidential acquisition or divestiture activities engaged in or contemplated by the Company

  • Accepting or seeking anything of material value from contractors, vendors, or persons providing services/materials to the Company

  • Destruction, removal, or inappropriate use of records, furniture, fixtures, and equipment; and/or any similar or related irregularity


Trending NFM Red Flags

  • Altered bank statements (dollar amounts, account owner name)

  • Falsified written verbal verifications

  • URL’s missing from bank statements

  • Undisclosed properties

  • Undisclosed debts

  • Altered paystubs

  • Additional debts which appear in bank statements not addressed 

  • Verification of Employment addressed to a specific person


Industry Trending Fraud

  • Purchasing property in close proximity of currently retained property.

  • Homeowners insurance reflects a different addresses for the property insured and mailing address.

  • Refinance owner occupied property shows vacant on the appraisal.

  • Items on the appraisal that may indicate second home/ vacation locations.

  • Borrower moving down in housing (either size without a reasonable explanation for down-sizing or value of home).

  • Borrower keeping current house (with or without a current lease to offset mortgage payment).

  • Borrower provides a lease from a family member for current home (renter has same last name as borrower).

  • Other person(s) on title which seemingly have nothing to do with our transaction.

  • Non-Occupant Co-Borrower.

  • Unreasonable commuting distance from current employer.


Our Policy regarding Mortgage Fraud

To establish a Policy and Procedure to support and maintain a business environment of fairness, ethics, and honesty in the broadest sense. NFM is committed to a Policy to deter, detect, and take appropriate actions to prevent fraud. Our hotline number to report is 1-866-765-1976.

https://singlefamily.fanniemae.com/mortgage-fraud-prevention


Consequences

Fraud not only carries penalties from regulators for those who commit this crime, but also carries significant financial, reputational and legal risks. This affects NFM, its employees, divisions, its investors and other individuals and entities with whom NFM conducts business. Some consequences of non-compliance include:

  • Criminal punishment

  • Financial loss

  • Repurchase demands

  • Damage to the company's reputation

  • Loss of lending license

  • Loss of customers

  • Litigation

  • Loss of employment for employees