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Mortgage fraud has become an undeniable blemish on the industry across the nation. According to many, fraud has become one of the leading contributing factors to the nation’s growing foreclosure rate.

 

Mortgage fraud covers a wide range of financial crimes including equity skimming, application fraud, credit or income misrepresentation, or asset and down payment misrepresentation. Fraud can be committed by anyone in the transaction, including the borrower, lender, agent or appraiser. However, new legislation in Colorado is targeting lenders.

 

This month in Colorado, Governor Bill Ritter signed five bills into law as a measure to remedy fraud in the state and hopefully help to lower the likelihood of foreclosures in the area. The bills are designed to prevent mortgage brokers from misleading borrowers as well as prevent them from employing strategies designed to commit borrowers to loans that they simply cannot afford.

 

While new laws are an instrumental measure in combating fraudulent practices on the part of the lender, as a consumer you should still be aware of ways you can protect yourself against mortgage fraud. According to The Mortgage Bankers Association (MBA), a national association representing the real estate finance industry, there are several measures that you can take to make sure that you’re not a victim of abusive lending practices that may lead to mortgage fraud.

 

 

• Don’t falsify information on your application, even if you’re encouraged by the lender
• Don’t leave important sections or signature lines blank when filling out documents
• Make sure your loan file is complete and that your Good Faith Estimate, Special Information Booklet, Truth in Lending Statement and HUD-1 Settlement Statement are all included
• If you’ve refinanced your loan several times, beware of increases in monthly payments each time and/or the total amount owed on your home
• Beware of documents that reveal that your interest rate calculation will change to require you to pay “daily interest” in instances when your payments are late
• Beware if the loan amount on the loan you obtained is higher than the value of the home
• Raise questions if you’ve incurred any unexpected costs at closing that were not explained to you prior to the settlement
• Raise questions if your monthly payments on your mortgage loan are higher than you anticipated based on the initial disclosures
• Beware if you have a balloon loan (one in which after a series of low payments the entire loan balance is due in a large lump sum) and you will need to obtain another loan to finance that final lump-sum amount
• Beware of requirements to buy credit insurance (insurance that will repay the debt if you die or become disabled)

 

A good mortgage broker has your best interest at heart and works to make sure that you are making a sound financial decision when you’re purchasing or refinancing your home. If you need guidance in the mortgage process or have questions, give us a call and let us help you make an informed, honest decision about your home loan today.

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