Consumer Guide to Mortgage Fraud Prevention

This guide is designed to help consumers educate themselves about mortgage fraud and learn how to avoid becoming either a victim or perpetrator of mortgage fraud. Unlike much of the information that is available regarding mortgage fraud, this guide emphasizes on the consumer aspects of fraud and fraud prevention, rather than those aspects that are mainly of interest to lenders and other mortgage professionals.

Mortgage fraud is a growing problem. The FBI reported over 63,000 total incidents of actual and suspected mortgage fraud in 2008. Early figures for 2009 show a rapid increase in suspicious activity as scam artists seek to take advantage of vulnerable homeowners in the weakened economy, with over 40,000 cases reported through the month of April. The problem is more acute in some states than others; in terms of relative numbers, the top 10 states for mortgage fraud activity in 2008 were California, Colorado, Florida, Georgia, Illinois, Maryland, Michigan, Missouri, New York, and Rhode Island.

This guide explains, in clear, straightforward terms what mortgage fraud is and why consumers need to be concerned about it. Short, individual sections outline some of the more common mortgage frauds, how to protect yourself from fraud, warning signs of mortgage fraud and an overview of government and nongovernmental agencies that investigate mortgage fraud or can otherwise be of assistance in dealing with it. The last sections provide a state-by-state breakdown of resources where consumers can turn for help in dealing with mortgage fraud, including law enforcement agencies and regulatory bodies.

Chapter 1: What is Mortgage Fraud?

An overview and definition of mortgage fraud, along with some illustrative. An explanation of the two main types of mortgage fraud - frauds that victimize lenders and frauds that victimize consumers - is provided as well.

Chapter 2: Why You Should Worry

A look at some of the legal and financial consequences of mortgage fraud, including some of the ways  consumers might get caught up in mortgage fraud, potential penalties and the increased efforts that authorities are making to combat it.

Chapter 3: Common Lender Frauds

A more detailed explanation of the differences between frauds where the lender is the victim and frauds that target consumers, followed by a closer look the former. Lender frauds are further broken down into their two main types  - fraud for profit and fraud for property - which are explained. Some of the more common lender frauds are identified and described.

Chapter 4: Common Consumer Frauds

Following up on the previous chapter, this provides a closer look at mortgage frauds in which the borrower or homeowner is the victim. These include foreclosure prevention and debt relief scams, which seek to take advantage of homeowners who are vulnerable due to financial difficulties, and more general mortgage and real estate scams that seek to separate investors or homeowners from their money.

Chapter 5: Mortgage Fraud Protection

Some guidelines on how to proceed when dealing with mortgage and real estate transactions in order to avoid becoming a victim of mortgage fraud or liable in a fraudulent activity yourself, including specific tips based on advice from financial professionals and the FBI.

Chapter 6: Red Flags & Warning Signs

Some of the warning signs that mortgage fraud may be involved in a real estate transaction, based on some common elements that many frauds have in common. Borrowers or homeowners who recognize any of these in a pending transaction should be wary.

Chapter 7: Federal Agencies

An overview and listing of the main federal agencies consumers can turn to when they have been victimized by mortgage fraud or need assistance in dealing with a potentially fraudulent situation, along with descriptions of their respective roles. Included are both agencies that investigate and prosecute mortgage fraud, and those that can provide consumer information and advice.

Chapter 8: Other Organizations

An overview of various nonprofit agencies that can advise consumers, provide educational materials or otherwise be of assistance in dealing with mortgage fraud, along with links to web sites and contact information.