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Mortgage fraud scam involves offering more than the asking price

Latest example of mortgage fraud steals thousands from lenders

As housing prices have reached record levels in the United States, criminals have found more and more ways to take advantage of people who own homes and people who lend money against them. Mortgage fraud is one of the fastest growing areas of crime, and it is now the preferred method of white collar crime in the United States. The forms of the crime itself can vary, with the crooks forging titles to houses, engaging in appraisal fraud and selling homes for more than they are worth, to forging signatures and selling homes they do not own.

The latest wrinkle in this scam is somewhat more direct and involves taking money from the lender. This is a change from some other forms of fraud, where the lender was often party to the scam. In this case, the scam involves a seller, a buyer and a property appraiser as an accomplice.

The seller, who is not a knowing party to the crime, has a house for sale. In the slowing housing market, the home may have been for sale for a while and the seller may be getting a bit anxious. The buyer then appears and offers to buy the house. The twist in this scam is that while the buyer offers to buy the house, he or she offers to pay more than the asking price. A lot more, in fact. It is not unusual for buyers to offer $100,000 or more above the asking price.

The seller isn’t being offered a gift of $100,000 extra; the buyer asks that the extra money be given back to him at closing. This isn’t ordinarily possible, as the loan cannot be granted for more than the home’s asking price. But the appraiser, who is in on the scam, submits an estimate of property value to the lender that indicates that the property is worth the amount in question, which includes the extra cash. With the appraisal in hand, the lender grants the loan to the buyer, who receives the cash from the seller after the sale closes. At that point, the buyer simply takes the cash and disappears, leaving the lender with a mortgage for $100,000 more than the property is worth and a mortgage that will never be repaid.

Many sellers, eager to sell their houses, have been going along with such schemes, apparently unaware that they are illegal. By going along with the offer, knowingly or not, the seller has become party to mortgage fraud. That means that the seller could face prosecution, possible jail time, and may even be held liable for repayment of the extra money. While examples of prosecution in such cases are currently rather rare, they probably will become more common in the future as these sorts of crimes become more widespread.

If you are selling a home and you should be approached by a buyer or a representative of a buyer, who offers to purchase your property for a price that is substantially higher than your asking price, be careful. By accepting such an offer, you may be setting yourself up for participation in a crime. The last thing you want to do when selling your house is end up in jail.

 
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