How to Protect Yourself Against Mortgage Fraud

By Brian O’Connell

Mortgage fraud occurs when a potential homebuyer, seller, or lender lies or omits key information that leads to a mortgage loan approval or terms that the applicant wouldn’t normally qualify to receive. And unwitting consumers can find themselves caught in the midst of such scams by unscrupulous lenders or brokers..

For homebuyers, the key to avoiding mortgage fraud is educate yourself, and never sign a mortgage application form or home appraisal form until you’re certain all the information—especially personal financial data—is accurate.

Here are some steps to take to protect yourself:

1. Stick to Credible Referrals

When you’re buying a home, you need to trust your mortgage partners. Build that trust with referrals from family, neighbors, friends, and especially real estate professionals who’ll vouch for a lender, broker, appraiser, or real estate agent. If you have an established relationship with a bank or financial institution, leverage those relationships as well. You’ll be more prepared if you get pre-approved for a mortgage by a reputable lender so you make the homebuying process smoother.

2. Avoid Aggressive Mortgage Lenders

Mortgage lenders who push you hard to sign on the dotted line should be avoided. That’s especially the case with mortgage lenders who tout no-money down or “low or no document” loans. These loans may or may not fall into the “fraudulent category,” depending on state-by-state mortgage loan statutes, but they may get you a loan with high interest rates that could increase over time, and high mortgage fees that only add to your mortgage loan debt burden. If anyone suggests that you lie on a mortgage application, don’t. That’s an immediate red flag to avoid working with that person or firm.

3. Don’t Sign Any Shady Documents

Never sign a mortgage loan document that is either blank, has blank lines, or contains questionable or unfamiliar data. Doing so could lead you down the path to mortgage fraud. Instead, consult with a trusted real estate professional or legal expert to review the mortgage loan document.

4. Check Your Credit

Additionally, since mortgage fraud may also involve identity theft, you want to regularly review your credit report for any new accounts you don’t recognize. Another way to keep an eye out for new accounts is to use an identity protection product like Experian IdentityWorks, which provides alerts when new accounts or inquiries are added to your credit report. You also get access to a dedicated fraud resolution agent if you’re a victim of identity theft.

5. Be Practical

Buying a house can be an emotional experience. Don’t let your desire to buy your first place or dream home cloud your good judgment. Take your time with assessing all people you work with from your real estate agent to your buyer. If there’s something you don’t feel good about, seek a trusted advisor.

Here’s more information on mortgage fraud and how to stay protected.