What is a red flag of an illegal flipping scheme?

There are several different types of mortgage fraud and they can be difficult for lenders to detect. This blog looks at the five most common types of mortgage fraud, how to identify warning signs of mortgage fraud, and how to report mortgage fraud cases. Mortgage lenders will most likely perceive an illegal change of ownership with some common indicators. If the purchase uses an intermediary or a fake buyer mentioned above, that person can often be a “flipper” who provides the fraudulent appraisal.

Other indicators may include that the property was recently foreclosed or that it was purchased at an abnormally low price, or that the appraised value is suspiciously inflated. This can be another red flag or when tracking shows that title to the property has been transferred soon after the sale. Income fraud occurs when the borrower misrepresents the availability or continuity of the source of income required for the loan amount. While there are several different types of mortgage fraud, there are some that are more common and each has its own red flags on how to spot them.

If further action needs to be taken, Government-Sponsored Companies (GSE), including big names like Fannie Mae and Freddie Mac, have reporting steps that can be followed, and even hotlines to call. While the process of buying a property, maintaining or improving it, and reselling it for profit is not illegal, buying it below the market and reselling it immediately at an artificially inflated price is fraudulent. Mortgage fraud refers to an intentional misrepresentation of information needed to finance, purchase, or insure and mortgage. She has authored and published an extensive fraud training program across the country for financial institutions, as well as state and federal law enforcement agencies.

The real buyer could have bad credit or be trying to hide shaky commitments that could disqualify them from obtaining a mortgage. Loans for borrowers or nominees: A technique to misrepresent a borrower's credit and identity to the lender by using a substitute “fake borrower”, which may or may not be paid by the scheme orchestrator.