Residential mortgage fraud occurs when borrowers make false or misleading statements to obtain mortgage loans. Mortgage fraud also includes the diversion of escrow funds at the time of settlement.
Title agents and escrow account managers should be on the lookout for the following warning signs to spot possible mortgage fraud:
- excessive or undocumented repair bills, excessive consultation fees, and marketing fees to be paid before or after closing.
- the sale price increased shortly before closing and the difference must be paid by a promissory note to the seller;
- the request to ignore the lender’s closing instructions or to have the funds disbursed differently from that stated in the settlement statement.
- a last-minute power of attorney, with no explanation;
- the buyer does not have to pay anything, or the buyer is paid money.
- the buyer must use a particular broker or lender or the chain of title includes the broker or lender.
- Get recommendations for real estate and mortgage professionals. Check the licenses of industry professionals with regulatory agencies.
- Beware of agents who contact you without your request or use high-pressure sales tactics.
- Review written information, including recent comparable sales in the area and tax assessments to verify property value.
- Understand what you are agreeing to and what you are signing. Please review all documents carefully. Ask a lawyer for help if there is anything you do not understand. Make sure the name on your application is your correct legal name.
- Check the title history to determine if the property has been sold multiple times within a short period. That could mean the property has been bought and flipped and the value has been falsely increased.
- Know and understand the terms of your mortgage. Check your information against the information on the loan document to make sure it is correct and complete.
- Never sign any loan document that contains blank spaces.
- Check your credit report every year. You can get a free copy of your credit report by calling AnnualCreditReport.com at 877-322-8228 or by visiting www.annualcreditreport.com.
Additional tips to avoid fraud
- Beware of premiums that are too low. Some schemes promise extensive coverage at a very low price. You can usually save money if you shop carefully, but beware of any plan or policy that costs significantly less than the others you’ve listed.
- Get agent and company information from TDI. In addition to the license status, check the company’s complaint rate and credit rating. The rate of complaints and degree of economic solvency indicate if a company offers good customer service and if it is financially stable.
- Take your time. Take all the time you need to shop for any type of insurance. Don’t let any agent or company representative pressure you into making a decision. Be careful if the agent is evasive when you ask about prices, coverage, or payment arrangements.
- Always pay by check or credit card. Check and credit card payments can be tracked and verified. If you must pay in cash, be sure to get a receipt that shows the name of the company, the date, and the amount you paid.
- Beware of policies that are sold door-to-door or over the phone. Unlicensed companies often use these methods to sell their products. Insist that you want to know the physical address of the company and be sure to find out if the company and agent are licensed. Although policies sold in person or over the phone are sometimes legitimate, prices are often higher and provide less coverage than policies sold by traditional agents.
- Save and protect your insurance documents. In addition to the policy itself, keep a copy of any documents that have been exchanged between you and the company, such as advertisements, receipts, and claim information. Also keep notes of any telephone or in-person contact with the company, including the name and title of the person you spoke with, the date, and what was said.