Until about May of 2007 there were plentifulness of non-conforming loan programs ready for high loan to value real estate speculation purchases. In fact it was still relatively easy for a borrower with a 660 middle reputation score and six months of reserves to purchase an speculation property with no money down. Then suddenly all non-conforming lenders lost their final investors and that deal vaporized.
Overnight, seemingly, it became a requirement for a borrower to have ten percent or more down payment to purchase a non-owner busy property. Deals that were already in process across the nation and scheduled to close were suddenly no longer able to do so. The lenders who were underwriting the loans offered slight aid and, in fact, failed in many cases even to counter and ask for ten percent equity injection from the borrower. So the loan officer, the real estate agents, the seller, the title companies, and the borrower were essentially "hung out to dry".
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Lest you think there was no way nearby this issue let me explain what no ifs ands or buts happened in mortgage brokerages and speculation meetings across the nation: At least more than a few of these same loans were resubmitted to a dissimilar lender not as an speculation property but rather as an owner busy traditional residence. It is an old serpent come back to slither through the real estate finance industry.
Until about 2005 this was the estimate one form of real estate speculation fraud perpetrated by commerce insiders. Factually we fought against this institution for any years until non-conforming loan solutions became ready to real estate investors. Commonly we identified this form of fraud by investigating just a few points of the loan application. Those points are still valid today and any underwriter paying concentration to the file can no ifs ands or buts spot these flags for fraud and pull the file for mitigation.
Does it make sense, for example, for a buyer to move from a three-thousand plus quadrate feet home in the suburbs valued at four-hundred-thousand dollars to a twelve-hundred quadrate feet home in the city value at one-hundred-eighty thousand dollars? Not likely. There are many other ways to detect this form of fraud which I will not expose because these are the tools of my trade used to identify and deter this type of fraudulent activity.
If you, as a buyer, are implicated about being caught in a web of fraud and would never intentionally commit mortgage fraud let me comprise some tips for you. If you are quoted an interest rate by one lender of, for example, nine percent for a mortgage to purchase a real estate speculation property using fifteen percent down payment but other lender quotes, for example, seven percent and no down payment you are most likely speaking to a loan officer who whether knows nothing about pricing a loan or intends to have you commit mortgage fraud so they can earn a commission check.
The Fbi says that over eighty percent of mortgage fraud involves insider collusion. Chances are, however, if you sign on the line indicating you intend to occupy a property as your traditional abode but a join of years down the road it is discovered you never busy the property but instead used it as an speculation property it will be you who has signed your name indicating you did intend to occupy. Not doing so whether willfully or unknowingly puts you at risk of being charged with mortgage fraud for profit. Your loan bargain will generally allow you only thirty days to take occupancy of the property.
Not being ignorant of the fact that this will continue to happen in part because many borrowers cannot understand how this is fraud and believe it does not hurt whatever let me take you on a short journey. There was a young man who worked for many years to save adequate money to come to be a lender. He had only adequate to lend to one purchase deal and created his lending guidelines to safe his funds. He required the man purchasing the property to live in it because he knew if it was an speculation property and the man fell on hard times that man would pay his own home payment before he paid the payment on his speculation properties. In other words the traditional abode presented a much lower risk.
The young man did no ifs ands or buts fund a closing for a nice young lady who was purchasing her first home. She was so excited and had so many plans about how she would paint, redo the kitchen, put in new hardwoods, and landscape to give the home some overwhelming curb appeal. The young man was excited for the young lady, he funded the transaction and was pleased when he received his first few mortgage payments.
Several months went by where the young man was receiving his payments on time until one month he did not receive his payment on time. He sent a letter to the young lady who indicated she would no longer be able to make her payments due to the fact that the citizen renting the home from her had moved out and left the home in terrible condition.
In the end the young man had to take re-possession of the property which required thousands of dollars to return to market condition. Instead of going through all that trouble he finally suitable a short sale offer on the property for tens of thousands of dollars in lost revenue. At last the young man's hope of helping citizen with his good, honest loans were destroyed. The cause? Nothing more than occupancy fraud.
But what if the payments are always made on time? Nobody gets hurt then, right? Wrong. Lending is risk based. The loan made on that property was based on risk that was mitigated by the borrower saying she would occupy the property. This lowered the down payment requirements as well as the interest rate. The hurt was done on the secondary market when the slight Old Ladies medical insurance Fund purchased the loan (had the loan been sold). They purchased a loan which should have been performing at a lower market exposure and higher monthly earnings to offset the risk. In fact, the mortgage pool was contaminated and could bring down the house.
Summing it up there is no way nearby the fact that, with only a few mitigating circumstances, owner occupancy statements can lead to mortgage fraud. This is approximately always categorized by the Fbi as "fraud for profit". Stay clear. Do not do it. There are dozens of ways you will be caught and many of them happen well after the closing date.
Home Occupancy Fraud Back On the Charts
