New Texas Bill 716 Punishes Mortgage Fraud Perpetrators
October 24, 2007 – 4:36 pm
It won’t pay as much to mortgage professionals or homeowners to falsify information on mortgage documents! If Texas Bill 716 has its way, your only pay would be an orange jump suit and three square meals a day in a six foot enclosure! A stay at Club FED (federal penetentary) does not have the greatest scenic views.
What does Texas Bill 716 mean for the consumer? Hopefully it will weed out the mortgage professionals who use the current structure in the mortgage industry to defraud consumers and persuade those considering fraud to think twice. In any case the Bill has put some teeth into the ability of law enforcement agencies to combat the fraud going on in the industry at least in Texas. According to Texas Representative Solomons of Carrollton who authored the Bill, Texas ranks in the top ten in mortgage fraud. The Bill formed a task force headed by the attorney general, assisted by state, federal and local authorities to enforce and prosecute those who commit mortgage fraud. The task force may also receive assistance from the FBI, US Secret Service, US Department of Justice, and the IRS among others in pursuing those engaged in fraudulent activities in the mortgage arena.
Yesterday I attended a training session on mortgage fraud. It was shocking to see the depth that some will go to defraud consumers or lenders. The trainer in our session had first hand experience as an expert witness on a case in Austin involving over 40 duplexes. The duplexes were valued on the local tax records at $55,000 but were financed at $200,000. The purchaser is now serving a prison term along with several others that have perpetrated the fraud. The prison term for convictions is 2 years to life. Fraud is rarely a one-man show. In this Austin case there were numerous parties involved including the real estate agent, appraiser, loan officer, loan processor, title attorney and underwriter at the mortgage company.
Schemes of this magnitude are very unfortunate. Fraud appears to be so prevalent that the Bill also will look to the individual borrowers hoping to occupy a property to make sure that fraud is not being committed on that level. Fraud in this area would include any intentional misrepresentation (omission included) of material fact(s) that would alter the underwriting decision of a lender to grant financing. Activities that are considered fraud and thus illegal include using various mortgage products to misrepresent income and/or expenses, renting jobs or assets that misrepresent your situation, renting someones credit score to improve yours, altering documentation, or misrepresenting intended occupancy.
For investment real estate purchasers I recommend what Ronald Reagan used to say, “Trust but verify.” Passive investors can be spared a lot of grief if they will check the public tax records for the tax value of the properties. A Huge Red Flag would be waved based solely on the tax valuation of the properties if you are paying a great deal more than value indicated by the tax records. County tax records are easy to check and there are other sources also available to check the tax value like Zillow.com. In the case of the fraud identified above, the 40 plus properties were appraised at 4 times what the tax records indicated!
Be smart and don’t end up in an orange jump suit!
Also see: Mortgage Fraud, Are You Brave Enough?
<a href=”http://technorati.com/claim/89f2ep3wwm” rel=”me”>Technorati Profile</a>
