I received a phone call the other day from a client of mine who was frantic and sounded to be on the verge of tears. When I finally got to the bottom of the reason for the call, I learned that she had made a mistake when she filled out her application. Keep in mind that for all the applications my fellow loan officers receive daily, I would think you would have a better chance of picking the lottery numbers correctly than you would finding a loan application submitted that didn’t have at least one small error or omission. My client had completely forgotten about a small piece of land that she had some small ownership part in that was given to her from her father years ago and that she is responsible for whatever property taxes there are on that property. Well, she didn’t list it on the application and although there is no lien on the property, she was responsible for the tax liability and it is partially titled in her name. Bottom line in this instance is the omission had no impact on her qualifying for the loan, but should have been disclosed. She wasn’t committing mortgage fraud in this case because the omission was not purposeful and a way to get her qualified, she came to me with the omission as soon as she realized what had happened, and lastly, it would not have benefited her in the least to purposely leave that off the application.
Some of the things I have had to deal with over the years that were considered fraud include:
- Purposely leaving debt(s) off an application thinking we wouldn’t find out about it
- Not listing property owned and that has a material impact on qualification
- Purposely misquoting income
- A self-employed borrower giving himself a raise before he made application to enable him to qualify
- Knowingly applying for a mortgage as a primary residence where there was never any intention of ever living in the property as a primary residence
- Creating a lease agreement for rental income for the purposes of qualifying
- Clients signing spouse’s signatures for convenience
- Trying to slip gift funds into bank accounts early to avoid the lender knowing the funds were not the clients’
- Purposely not disclose alimony, child support, or separate maintenance
- Misleading information given for assets, housing arrangements, residency status, marital status and even race and ethnicity
This is just a partial list of things I have run into in the past. Let me be very clear about the fine line between what is and what is not mortgage fraud. Purposely trying to manipulate anything regarding your current status, which includes leaving information out or off of the application, is mortgage fraud, period. While certain things are more heinous than others, it is all still mortgage fraud. I can assure you that by the time an underwriter gets your file open in front of him/her, we know EVERYTHING about you. We get third party verification on everything about you from other banks, employers, and even the IRS. If everything does not match up exactly the way you have said it should, we need to know why. If the reason boils down to you “not thinking it mattered”, we have a huge problem. I have two words for you to keep in mind when applying for a mortgage, “full disclosure”. If you have a problem qualifying for a mortgage loan, it is what it is and there is a reason why my guidelines are what they are. It is not worth you trading in your new home that you are trying to purchase for an 8 X 10 at the state correctional facility. Jail and monetary penalties will apply, guaranteed.
I know most everyone reading this feel it is common sense stuff, but you would be amazed at the perception of this mystical “gray area” out there when it comes to applying for a mortgage.
One more way to help you Manage your Mortgage.