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What is Mortgage Fraud?
Borrowers need to understand that there are three types of mortgage fraud;
The first type of mortgage fraud is mortgage origination fraud, which occurs when a mortgage application is submitted to a Lender. The Lender is legally responsible for underwriting the loan. This underwriting process includes verifying the completeness, accuracy and truthfulness of the information submitted; whether submitted by the borrower, or by a third party, such as a mortgage broker. Through the underwriting process, the Lender should identify any erroneous or fraudulent activity. The mortgage crisis arose from this type of fraud but most mortgage fraud cases today are based on the fraudulent acts of lenders and servicers today.
The Second Type Of Mortgage Fraud
The second type of mortgage fraud is mortgage servicing fraud. A mortgage servicer is the company that collects mortgage payments, performs collections on late mortgage payments and performs initial mortgage foreclosure work. The servicer may be a related company to the lender or the investor, the owner of the note, or totally separate. Servicing is a very profitable business which is why servicers purchase the “rights” to service loans. The lender or investor of a loan is required to provide notice to a borrower prior to any assignment of a servicer. Even though this is a legal requirement found in RESPA for more than 30 years, lenders, investors and servicers regularly fail to follow the law, often committing a variety of fraud in the process; defective notice, fraudulent mortgage statements, misapplied funds, defective assignment etc.
The Third Type Of Mortgage Fraud
Lastly, the third type of mortgage fraud is a result of a wrongful foreclosure. This occurs when the foreclosure process is performed illegally for the benefit of the lender or servicer. In trustee states, or non-judicial states, improper Notice of Intent to Foreclose or Assignment Of Trustee are issued, or as often is the case never delivered, are common. In judicial states that require the foreclosure process to go through a court, the filing of a foreclosure suit with false statements such as incorrect Mortgage Balance, incorrect Delinquency Balance, or the foreclosure suit is filed by a party with Improper Assigned Rights or has No Standing or Interest. Very often the 2012 DOJ settlement agreement is violated as lenders and servicers continue illegal practice such as Dual Tracking and Bait and Switch Tactics.
Qualified mortgage fraud attorneys are available to help and can be very successful. Borrowers can always represent themselves in these types of mortgage fraud cases Pro Se, if they follow the rules and foreclosure process of law. Mortgage attorneys do this for a living and are almost always more successful in foreclosure suits.