more borrowers are LYING about their income
Borrowers are lying about their income on mortgage loan applications again, and this time, the internet is helping them convincingly fake it. According to a report from CoreLogic, mortgage fraud risk rose more than 12 percent during the first half of 2018, with one in just over every 100 mortgage applications having indications of fraud. The biggest factor in this rising risk appears to be fake income reporting, which was up 22 percent annually according to the report.
Bridget Berg, principal of fraud solutions strategy for CoreLogic, explained, “Undisclosed real estate liabilities, credit repair, questionable down payment sources, and income falsification are the most likely misrepresentations.” Numerous online services, claiming to be “novelty item providers,” make this type of misrepresentation relatively easy for homeowners worried the real data about their financial situation will not land them a home loan.
Mortgage lenders say real estate investors are contributing to this increase in mortgage fraud incidence as well. One Maryland banker blamed rental owners and flippers for the rise in “occupancy fraud,” which involves lying about who will be living in the house. “Most people want to say they’ll live in the property because their terms will be better than if they’re renting out the property,” he explained.
Fraud risk tends to be even higher when loans are originated with wholesale lenders or brokers, who collect borrower’s information and then connect them with lenders who actually make the loans. CoreLogic listed states with the highest rate of fraud risk as:
- New York
- New Jersey
- Washington D.C.
- New Mexico
Do you think there is a solution for this type of mortgage fraud? Should investors have to pay higher rates if their properties are not owner-occupied?