How To Prevent Mortgage Fraud in New York?

Mortgage fraud undermines financial institutions, deceives homebuyers, and threatens the stability of neighborhoods. New York is host to a dynamic and competitive real estate market. Whether you’re a lender, a borrower, or a real estate professional, understanding how to prevent mortgage fraud in New York can be vital to your success.

Why Mortgage Fraud Is a Serious Issue in New York

Mortgage fraud involves misrepresentation, misstatements, or omission of facts by someone in connection with a mortgage loan. This is generally done with the intention of obtaining money or property fraudulently. Mortgage fraud can occur through borrowers, lenders, and real estate agents. It can also happen through appraisers, attorneys, and other third parties involved.

In 2024, data from CoreLogic showed that incidents of mortgage fraud had increased 8.3% nationwide from previous years.

The FBI classifies mortgage fraud into two categories.

• Fraud for housing. This is typically committed by borrowers who misrepresent information on loan applications to qualify for a mortgage.
• Fraud for profit. This involves professionals working together to defraud lenders or homeowners for monetary gain.

Most Common Types of Mortgage Fraud in New York

Certain types of mortgage fraud are more common in New York than others. These include:

• Income fraud. This happens when borrowers falsify their income or employment status to qualify for a larger loan than what they’re able to afford. This may include fake W-2s, pay stubs, or employment verification.
• Appraisal fraud. An appraiser may try to inflate or deflate a property’s value to facilitate a fraudulent transaction.
• Occupancy fraud. Applicants may claim that they live on the property as their primary place of residence and then flip it or rent it out.
• Identity theft. This happens when stolen personal information is used to obtain a mortgage under another person’s name, which leaves the real individual liable. In 2024, the U.S. saw 1 million cases of identity theft in general.
• Foreclosure rescue scams. Some people take advantage of stressed homeowners and offer to save their homes. In reality, they strip the equity and steal the title.
• Straw buyer schemes. This happens when an individual agrees to apply for a mortgage on behalf of someone else. This is often done in exchange for some form of compensation.

Strategies to Prevent Mortgage Fraud

Identifying mortgage fraud before it happens can save you from devastating legal and financial consequences. Watch for inconsistent or altered documentation, buyers with no intent to occupy the home, and sellers who are unwilling to work with title or escrow companies.

Don’t let anyone pressure you to act quickly or skip steps in the mortgage application process. Likewise, keep an eye out for anyone wanting to make unusual payment arrangements or lenders that promise guaranteed approval or offer extraordinarily low interest rates.

Here’s a further breakdown of how to prevent mortgage fraud.

• Verify all financial information. Lenders should use third-party verification services and avoid relying solely on the borrower’s documentation. Borrowers should ensure all their financial statements are accurate to avoid triggering red flags during the application process.
• Work with licensed professionals. You can check license statuses with the New York Department of State and the New York State Bar Association.
• Use reputable title companies. Avoid companies that are suggested by unfamiliar or unlicensed third parties.
• Conduct independent appraisals. Using an independent appraiser can reduce the risk of inflated or fraudulent valuations.
• Secure personal information. Safeguard personal and financial data through secure methods of transmitting documents. Don’t share sensitive information over email.
• Ask questions. Always ask for clarification if something seems off.
• Report suspicious activity. If you suspect mortgage fraud, you can report it to the New York State Attorney General’s Office, the FBI, the Department of Housing and Urban Development, or your local police department.

Legal guidance can be invaluable when buying or financing a home. An experienced attorney can help you better understand your rights and review contracts to ensure you’re protected.

FAQs

Q: How to Protect Against Mortgage Fraud?

A: To protect against mortgage fraud, verify the credentials of the lender, broker, or real estate professional. Review all loan documents carefully, and never sign anything you don’t understand. Avoid deals that seem too good to be true. Also, keep an eye out for high-pressure tactics that may persuade you into a bad deal.

Only work with licensed professionals and check with the Consumer Financial Protection Bureau at 855-411-2372 to find out if a company has experienced disciplinary action.

Q: How to Protect Your Deed in New York State?

A: To protect your deed in New York State, enroll in your county’s property fraud alert system. This notifies you of any filings under your name. Ensure the property is recorded correctly with the Bronx County Clerk’s Office. You might also want to consider putting your property in a trust or adding a co-owner you trust to help reduce your estate’s vulnerability. For added protection, consider consulting with an attorney to help prevent deed theft.

Q: How Do Lenders Detect Mortgage Fraud?

A: Lenders detect mortgage fraud through a combination of manual reviews and automated systems that flag suspicious activity. These systems verify income, employment, credit reports, and tax documentation. Fraud detection software can identify red flags, including inflated appraisals or straw buyers. Third-party verification services and cross-checking public records also help detect possible fraud.

Q: What Is the Most Common Example of Mortgage Fraud?

A: The most common example of mortgage fraud is income misrepresentation. In this type of fraud, the borrower inflates earnings or falsifies employment details to get a larger loan. Consumer Sentinel Network reported 845,806 types of imposter fraud in 2024. Mortgage fraud can lead to loan defaults and financial losses for lenders.

Contact a Mortgage Fraud Lawyer Today

Mortgage fraud allegations can involve lengthy investigations and severe penalties if you’re charged. Whether you’re a broker, borrower, or lender accused of falsified documents or misrepresentation, The Vitaliano Law Firm can help. Our firm offers aggressive legal advocacy and provides a thorough investigation of your case.

Reach out to The Vitaliano Law Firm today to arrange a consultation with an experienced mortgage fraud attorney and learn more about how to prevent mortgage fraud in New York.