How To Avoid Mortgage Frauds? Important Tips For Everyone

Finding a lender might be easy but getting a mortgage isn’t as easy as it seems. There are high chances you might be denied a mortgage if you don’t show up with the right paperwork. Also, to receive a mortgage protection insurance; you are supposed to make decisions with open eyes. At times, people fall for a cheaper mortgage or insurance plans that prove to be a fraud later. In this article, we are going to talk about steps to follow to avoid these fraudulent activities.

What Should Loan Officers do?

To avoid a mortgage fraud there are certain steps the loans officers or the brokers need to follow. Below, we are going to mention few of them:

  • As a loan officer or a broker, you are supposed to approve the appraisers who meet the state licensing and education requirements. The appraisers are supposed to be competent and maintain high-quality appraisal standards and you should look for such appraisers only.
  • You are not supposed to entertain any loan package from third-party sources and verify the loan documents and data provided by appraisers.
  • You shouldn’t accept the documents directly provided from borrowers that can’t be verified for the same.
  • Do not allow anyone to come between you and the borrower and take initiatives to crosscheck their employment, occupancy status, and equity contribution.
  • Remember, you will be held accountable for the authenticity of the document provided by the borrower and hence, are advised to be very careful about the same.
  • Try to offer a final expense plan to manage funeral expenses easily in case the unexpected happens.
  • You are advised to properly verify the claims made on loan documentation, made by the borrowers.
  • In case of a refinance, you are supposed to check if the borrower actually owns the property.

What Should Appraisers Do?

Like the loans officers or the brokers, appraisers are also supposed to follow some instructions and we are mentioning some of them below:

  • You should retain the records for each appraisal and be able to access the older appraisal data and relevant reports.
  • You are supposed not to entertain the appraisal offers from everyone around you. It must be a loan officer or a professional broker.
  • Do not select comps independently without doing the proper investigation.
  • Get a better control on the apprentices and trainees and perform the quality check to review the appraisals.
  • Through a valid document, you are supposed to properly cross-check the ‘owner of record’.
  • Shop properly to find cheap mortgage insurance quotes from a reputed and trusted provider.
  • Any discrepancies between the reality and what you report should be disclosed before time.
  • You are supposed to have adequate technology, policies, and procedures to keep the electronic signature safe and lock the final electronic report before delivery.
  • In case, there are instances of identity theft, you are supposed to report the same to the law enforcement or licensing board.

What Should Lenders Do?

As a lender, you too might be a victim of fraudulent mortgage cases and are supposed to be more careful about the same.

  • You are supposed to report all the instances of frauds or fraudulent activities to the law enforcement board.
  • You should conduct the proper background check to know the borrowers well.
  • You are advised to provide more responsibility to the closing agents to carefully look for the possibilities of a fraud.

 Audit the papers properly and initiate right measures to accept appraisals.

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Written by Anil Kumar

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