Ten years after the housing bubble burst and plunged the world into economic turmoil, mortgage fraud is making a comeback. There are ways, however, for both home buyers and Realtors® to avoid their respective risks.
Nasdaq recently reported that the Fed was toying with the idea of easing the capital requirements it puts on banks. Even without such a move, mortgages are once again becoming easier to attain. According to CoreLogic, 2018’s second quarter saw a 12.4 percent rise in mortgage fraud, when compared to the same period in 2017. Fortunately, Minnesota is not among the states either ranked highest for rate of fraud (New York, New Jersey, and Florida) or those with rates of fraud that exceed the national average (New Mexico, Mississippi, Illinois, Oklahoma, and Texas).
For their part, real estate agents must be on the look-out for buyers who wilfully misrepresent their assets, debt, source or amount of income, or intended use of a property – misdeeds made easier by websites that offer such services as fake pay stubs and phone-answering services to verify fake information. Reports from around the country include the New Jersey public official allegedly selling a home to his father-in-law for $425,000, and then buying it back for a $1.
The biggest risks, say two Dallas Realtors®, comes from buyers who are either self-employed or those arriving in states with competitive sellers’ markets. RISMedia advises real estate brokers to insist on proper identification, to double-check representations of finances and assets, and to get the buyer to state the purpose of the home.
Rising interest rates and competitive markets also tempt brokers into packaging loans for unscrupulous lenders. On Long Island, the owner of a mortgage modification firm stands accused of skimming $568,000 worth of payments from 32 home owners.
Homeowners, meanwhile, also must beware of falling victim to mortgage scams, taking such steps as insisting on accurate appraisals. The FBI urges home buyers to investigate recent tax assessments and sales amounts of other homes in the neighborhood, to vet agents and lenders thoroughly, to avoid deals that promise no money down, and to refuse to sign blank documents. Other tips include being alert to fake government programs, leaseback or rent-to-buy scams, or promises of debt-elimination.
Choosing an exclusive buyer agent can’t replace due diligence, of course. Even so, joining forces with a brokerage devoted to 100 percent representation of home buyers is a good place to start.
You know why lots of second-time home buyers choose an Exclusive Buyers Agent over a traditional real estate agency? It's because they've already been through the process—and realize there's a better way to buy a house.