Other Sources of RE Fraud

Income Misrepresentations

 

Representations occur when a borrower falsifies their income or employment to qualify for a loan. This type of misrepresentation is often associated with stated income loans and flipping. Buyers for housing or for profit engage in this activity. The prior engage in acts of misrepresentation to qualify for a larger home and the latter to qualify for a larger loan. A red flag is where a buyer makes an unrealistic income in relation to their profession/occupation or a drastic increase of income due to raise or new job.

 

 

Asset Misrepresentations

 

 

A borrower, for many of the same reasons as falsifying income, will falsify assets. A common type of fraud is the omission of liabilities on a asset and liability form. Either the borrower will over estimate the value of the asset column or omit/decrease the debts to increase their net worth.

 

 

Down Payment

 

 

A common practice is to take a gift from a third party, sometimes from a straw man, the seller, relative or an industry insider. The down payment is deposited into a buyers account to show proof of funds. False documents can also be created to show the acceptance of a down payment. The basis for the idea is that the Lender believes that the Seller received a down payment directly from the buyer. A common red flag is a down payment assistance program. Many programs had excessive fees or placed restrictions on how their assistance/program is to appear on the HUD1.

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