Recently, many potential homeowners are finding that there is a limited inventory of houses and those that are available may not fit within their budget. Even with these obstacles, it is important to be honest on a mortgage application. If a buyer commits mortgage fraud, there can be serious penalties.
Mortgage fraud
Mortgage fraud is illegal and involves obtaining a mortgage based on deceptive information. It can involve several types of misrepresentation.
Income fraud happens when a borrower intentionally misstates their income on the application so that they can qualify for a larger loan amount. Sometimes, this is also accompanied by falsified documents, like altered pay stubs. Fraud can also happen when the value of the property is misrepresented, allowing the buyer to obtain a larger loan.
Identity thieves may use stolen identities to apply for a mortgage and create false documents, like identification cards and bank statements. Despite the programs lenders have in place to verify borrower information, fraud can still occur.
Potential penalties
In addition to fines and a requirement to repay the amount stolen from the lender, a person who commits mortgage fraud can face prison time. Their sentence can range from months to several years, depending on the extent of the fraud. The court may also impose harsher penalties for repeat offenders.
Along with criminal penalties, a conviction for mortgage fraud can affect a buyer’s ability to legitimately obtain a mortgage in the future and damage their credit history. It can also cause them to suffer reputational harm and may have professional consequences.
If a person is accused of mortgage fraud, there is help available.