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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Homeowners alert: beware of mortgage fraud

David Uffington King Features Syndicate

Mortgage fraud typically involves home appraisers, lenders, realtors, loan officers and a purchaser, known as the “straw buyer.”

Simplified, it works like this:

A “straw buyer” applies to purchase a home that has an inflated price based on a fraudulent appraisal. If the buyer doesn’t have good credit, he’ll be provided someone else’s identification and credit history. The lender approves the loan, and money changes hands at the closing table. The participants split the proceeds, and the straw buyer vanishes.

Often the house is left abandoned, or it is “flipped,” meaning that it is quickly resold multiple times, with the fraudulent value rising with each flip. Honest lenders who are duped into loaning more than a house is worth often end up with a property on their hands with no one paying the mortgage.

Whether you’re a current homeowner or a potential buyer, mortgage fraud can affect you. Property values in your neighborhood will rise, and so will the real estate taxes as the fraudulent valuations increase. Homes can be left vacant as a result of flipping, causing neighborhoods to deteriorate and inviting crime.

Ten states are currently on the “hot” list for the number of mortgage frauds: Georgia, South Carolina, Florida, Michigan, Illinois, Missouri, California, Nevada, Utah and Colorado. Atlanta leads the nation in mortgage fraud.

Here’s what you can do:

“ If there are more than a typical number of vacant homes in your neighborhood, find out why. It could be that the properties are being flipped. Check courthouse records to see who is buying the homes and at what price.

“ If you are approached to refinance and the appraisal for your home comes in much higher than you expected, beware. The extra money could be kickbacks. If you later decide to sell, you could discover that your home is worth much less than the inflated appraisal, and you won’t be able to sell it for the mortgage amount. You, the homeowner, will be responsible for paying back the higher mortgage.

Call your state attorney general’s office, the appraisal licensing board and the real estate commission if you suspect fraud in your neighborhood or if you have been approached with an unrealistic refinance scheme.