How it worksIn one example, the buyer - sometimes a "straw borrower" - uses a fake identity or another person's name and credit history to obtain a fraudulent loan. In this scheme a combination of identity theft and mortgage fraud is used to swindle the seller and the lender. The "buyer" offers the seller much more than the home is worth, secures a loan for the over-valued price, then pockets the difference. And in a worse case, the swindler convinces the seller to finance some of the cost of the mortgage. The seller ends up handing cash to the "buyer," who has no intention of actually purchasing their home.
Who loses? Everybody. Often the seller is forced into foreclosure, which hurts both their credit and the neighborhood, as the home is left standing empty with its value deflated. And the lender who has been defrauded is stuck selling a foreclosed home - often at below-market rates. These negative effects can reverberate through a neighborhood as over-inflated housing prices lead to higher property taxes. Neighbors find themselves stuck with a higher tax bill as a result of inaccurate values - or find that they have an upside-down mortgage as they owe more than the house is worth.
What to doIdentity theft is pervasive in mortgage and foreclosure fraud. Protect yourself by checking your credit report once every six months. Consumers can now check their report for free once a year from each of the three reporting bureaus.
- Last edited October 30 2008
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