What exactly is mortgage fraud?

"Most types of financial fraud are relatively straightforward: the fraudster uses creative accounting, inflated numbers, or out-and-out lies to trick their victim into handing over money or valuables they wouldn't otherwise part with, usually while twirling a villainous mustache. You can probably think of a dozen examples off the top of your head, from Bernie Madoff's Ponzi scheme to the phone scams that try to convince your Nana her Social Security benefits are in danger."

"This type of fraud is exceedingly rare. In 2021, only 58 mortgage fraud offenders were sentenced in the federal system, and the number of offenders has decreased by nearly 70% since 2017. Understanding what makes mortgage fraud such an uncommon financial crime can help clarify what's behind the recent allegations-and can make your own brushes with mortgage underwriting feel less opaque. Here's what you need to know."

Mortgage fraud consists of intentionally deceiving a mortgage lender or underwriter to obtain a loan. Federal convictions are rare: only 58 defendants were sentenced in 2021, and convictions have fallen nearly 70% since 2017. Common borrower schemes include income misrepresentation, use of straw buyers who later transfer title, and illegal property flips that rely on fraudulent appraisals. The rarity of mortgage fraud explains its low public profile and can make underwriting interactions appear opaque. Awareness of common schemes helps borrowers and lenders recognize red flags and understand why prosecutions are infrequent.

Read at Fast Company