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Mortgage Fraud: Types, Prevention, Victim & Accused Actions

This page explains mortgage fraud, its various types, and how a lawyer from ContractsCounsel can help you navigate it.

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Mortgage fraud is when someone tries to deceive a lender, borrower, or underwriter during the mortgage loan process. It can be committed by various people involved in the process, such as lenders, borrowers, or homeowners.

If you’re dealing with mortgage fraud, it can be a stressful situation, especially if it involves your main residence. You can suffer major financial losses and emotional damages.

Read the rest of this article to learn more about mortgage fraud and how you can deal with it so that you recover your losses. We’ll also look at what you should do to take action, whether you’re a victim, or being accused of mortgage fraud.

What are the Common Types of Mortgage Fraud?

Mortgage fraud can occur in various ways. Here are the most common types.

  • Occupancy fraud. This type of fraud involves buyers lying about their use of the property. They might say they want to live on it but then they’ll rent it out to earn monthly income. By claiming to live in the home, they can take advantage of lower down payments and interest rates from lenders.
  • Straw buyer fraud. A borrower applies for a loan to purchase a property for someone else, who will pay the mortgage. They might be preying on a victim whose identity they’ve stolen and is now saddled with the mortgage on their name.
  • Liability fraud. This involves borrowers not being transparent about financial liabilities, such as other loans they have in their name. This prevents an accurate calculation of risk, which might have prevented the loan from being approved.
  • Home appraisal fraud. Getting a higher home appraisal increases the cost of the home and ensures selling the home is more lucrative.
  • Foreclosure fraud. A fraudster tells a homeowner they will help them avoid foreclosure by putting the property in their name and making payments in exchange for other money. However, the fraudster will steal the money and the home will enter foreclosure.

How Can You Prevent Mortgage Fraud?

You can avoid becoming a victim of mortgage fraud or being accused of it by following these tips.

Report Accurate Financial Details

When applying for a loan, be honest about your finances, income, and assets so that you’re transparent and avoid red flags in the eye of the lender.

Collaborate with Honest Professionals

Don’t rely on anyone to handle your loan on your behalf. Whether you’re looking for a lender or realtor, make sure you read reviews of them and get recommendations from people you trust.

Review Your Loan Agreements

You should take the time to read through the loan document and be sure that you understand all the terms. If you need assistance, post a request for a loan document review on ContractsCounsel, an online legal marketplace connecting clients with vetted lawyers.

You can post your project for free and you’ll receive bids from lawyers interested in your project. You can choose the best lawyer for your requirements based on factors such as their expertise, field of expertise, and experience.

Conduct Due Diligence

If you’re a lender, make sure you conduct background checks on people applying for mortgages. Their income, employment status and history, and identity need to be confirmed to avoid potential issues.

What Should You Do if You’re the Victim of Mortgage Fraud?

If you have been targeted by mortgage fraudsters, there are some things to do to protect yourself.

Report the Fraud

You should go ahead and report the fraud to the FBI’s Internet Crime Complaint Center, the Federal Trade Commission (FTC), and the Consumer Federal Protection Bureau.

Contact the Creditor

If you’re dealing with a fraudster who tried to steal your identity or use your identity to apply for a mortgage loan, you should inform your creditor.

Keep a Record of Communication and Documents

You should collect all important communications and documents regarding the loan. This can help your lawyer to build a case against the fraudster.

What Should You Do if You’re Accused of Mortgage Fraud?

If you’re accused of mortgage fraud, don’t delay in hiring a lawyer to help you build a case and protect your rights. Here are other things you should do.

Gather Evidence

Don’t be tempted to destroy evidence as your lawyer will be at a disadvantage when helping you build a defense claim. Keep a record of all communication, both positive and negative.

Let Your Lawyer Handle Communication

You might want to defend yourself or confront the accuser, but this could result in legal troubles. Your lawyer should handle all communication on your behalf. Don’t speak to any investigator without your lawyer present.

Understand Why You’re Being Accused

You could be accused of something you didn’t mean to do, but which was an honest mistake. This could include writing the incorrect income amount or overestimating it in application forms. You will have to prove that you didn’t have the intention to commit fraud.

Build a Strong Defense

Your lawyer will help you to build a strong case to defend formal charges made against you. Besides making an honest mistake in your loan application, there are other common defenses. These include:

  • You trusted professionals who misled you, such as brokers or lenders.
  • You didn’t misrepresent facts and can prove this.
  • You’re dealing with procedural errors, such as if investigations weren’t conducted properly and your rights were violated.

Why Should You Contact a Lawyer for Mortgage Fraud?

Seek legal guidance so that a lawyer can help you to best navigate the situation. They will help you, whether you’re a victim of mortgage fraud or being accused of it.

A lawyer will:

  • Review all loan documents to look for loopholes, red flags, and any vague or unfair terms.
  • Stop foreclosure during the fraud investigation.
  • Negotiate with lenders and other parties to protect your interests.
  • Build a defense for your case.
  • Challenge your intent if you’re accused of mortgage fraud.
  • Sue for damages.
  • Report the mortgage fraud.
  • Gather all appropriate evidence of the fraudulent activities to strengthen your position.

Do you need to hire a lawyer for mortgage fraud?

You should hire a lawyer on ContractsCounsel. All lawyers on the platform are vetted and have years of experience in assisting clients with mortgage fraud. Since this type of fraud can be complex with serious consequences, you want to have a professional lawyer supporting you and helping you to minimize your financial and legal risks.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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