Cheated Out of House and Home - Don't let these scams happen to you!

The July 2006 issue of Reader's Digest has a great article on mortgage fraud [ Cheated Out of House and Home - by Max Alexander ]

The term mortgage fraud encompasses a grab bag of cons and tricks, perpetrated on victims ranging from average homeowners to novice real estate investors to savvy bankers and the banks they represent. It is, according to FBI Special Agent Ronda Heilig, "one of the fastest-growing white-collar crimes in the United States."   

Scams Made Easy - Mortgage fraud has been around as long as home loans, but recent trends have made it easier -- and far more lucrative -- to game the system. Here's what's driving the crime spree:

• Money. Inflated housing prices are luring the bad guys.
• Technological advances. Inexpensive scanners and color printers make forgery and identity theft a cinch.
• A depersonalized application process. Time was when mortgages were approved by a local bank officer who met with homeowners in person, applying common sense and professional judgment to loan decisions. Crooks stood out like a purple house. Today, lending companies approve loans using computer systems; as long as the paperwork seems in order, it's hard to notice the bad apples.
• Inundated loan officers. Mortgage applications have surged in recent years, forcing lending institutions to hire hordes of new loan officers to handle the workload. Consumer advocates charge that some lenders have cut corners on due diligence to hasten approvals.

How does it work? - In a typical scenario, a scammer -- let's call him Joe --

1. assumes a false or stolen identity to buy a $100,000 property. He puts 20 percent down and assumes an $80,000 mortgage.
2. Joe then forges documents to make it look as though he's taken out a building loan for $50,000 to make renovations.
3. Next, his appraiser, also a crook, values the property at $200,000, pointing to "comparable" sales in a nicer neighborhood just up the road.
4. Now Joe can use the home as collateral for a $150,000 consolidation loan; he pays off the original $80,000 mortgage, keeps the remaining $70,000 and skips town -- defaulting on the loan and abandoning the house.

For the complete July 2006 Reader's Digest article, click here: [ Cheated Out of House and Home - by Max Alexander ]