Home Equity Lines of Credit Targeted by Criminals

A favorite target of criminals used to be subprime borrowers.  As the market for subprime loans collapsed, mortgage fraud crooks set their sights on another type of home loan.  They're now focused on the home equity line of credit (HELOC), and homeowners need to be especially vigilant.

Mortgage fraud artists love to find the low hanging fruit.  They used to target people with poor credit or heavy debt.  This population, generally desperate for an influx of cash, could easily be coerced into signing up for a bogus loan.  As the subprime mortgage industry imploded, con artists were forced to switch tactics and targets.

They're now honing in on people who have substantial amounts of home equity.  Through identity theft, these thieves are accessing HELOC accounts, and committing mortgage fraud.

How it works:  Finding a HELOC

In the past, mortgage fraud criminals coerced people into taking out subprime loans.  Now, these crooks are using identity theft.  The process is relatively simple:  Once a criminal has stolen your personal financial information, such as a social security number, they apply online for a line of credit in your name.  After the loan closes, the crooks instruct the bank to wire the funds to a bank account that they've set up in their own name, which allows them to verify receiving the money.  

The FBI reports that this is a significant emerging threat in the mortgage fraud arena.  It's theorized that many of these mortgage fraud crimes occur with the help of someone who works inside the industry.  A loan officer or a realtor typically provides information to the identity thieves, who then use the data to set up a HELOC.

Protecting yourself against identity theft

In the cases of HELOC theft, no one is safe, no matter his income level.  Recently, a Russian identity thief targeted billionaires Charles Wyly, Jr. and Anthony Pritzker.  The Soviet spy ring netted millions of dollars in their operation, although federal agents eventually captured its leader.

Identity thieves may consider people who are wealthy to be "low-hanging fruit," primarily because they don't closely monitor their credit reports.  Lacking any current credit problems, these people are often lulled into a state of complacency, or simply aren't in the practice of routinely checking their credit reports.  

Protecting yourself against identity theft can be accomplished by safeguarding your precious financial information.  Shred any documents that may contain your account numbers or other types of personal data.  Don't click-through to any suspicious looking emails from companies claiming to be your financial providers.  Avoid giving your social security number to anyone, especially over the phone.

The recent rash of home equity fraud indicates that, despite the decline of subprime lending, criminal activity in the mortgage sector has not diminished.  People of all income levels and credit worthiness need to protect their identity and monitor their credit reports.  By being on the alert, you can make this latest type of mortgage fraud a short-lived trend.