February 5, 2024
Needham, MA--Fraud in the mortgage transaction can come in many forms and while lenders and title agents have put many preventative measures in place over the past decades, fraudsters are constantly finding new ways to manipulate the system to reach their desired ends.
The most effective way to combat fraud is to become educated on the types of fraud in play in the real estate industry and to maintain effective communication with all of the professionals involved in the transaction.
One of the biggest concerns, of course, is wire fraud, but lenders also face plenty of instances of fraud for property where borrowers are presenting false information to get favorable mortgage terms or where fraudsters are trying to sell a property out from under a real owner, getting a buyer and the lender on the hook for mortgage funds with no collateral behind it.
Often, a real estate transaction can look perfectly normal to a real estate agent or a lender who is meeting with a buyer or seller. But the title agent may detect issues behind the scenes that just don’t add up. Here are some of the common scenarios.
Fraud for property
Fraud for property is when a borrower misrepresents their financial position in order to get better terms or to get approved for a loan beyond their means. Modern means of tracking income and debt have helped combat this problem tremendously, but those same advances in technology have made it easier for criminals to create a false trail as well.
Title agents are particularly canny at spotting false documentation and often are the last defense against such schemes.
Often times a transaction gets very close to consummation before fraud is detected and lenders can find themselves on the hook for approving mortgages for a property that is being sold fraudulently.
One scheme fraudulent sellers have adopted to cloak their identity is to insist on using their own notary public who is in the game with them. Suspecting the seller could be pushing for their own notary for the nefarious purpose of hiding their real identity, an experienced title agent will refuse to move forward with a transaction that does not adhere to approved protocols.
Vacant lot sales are often targets for fraud, and title agents are especially on alert for unusual factors in the sale, for instance if the property is in one state, but the seller is in another or when identification or signatures do not match the owner of record.
Title and escrow agents are experts in documentation and are keenly aware when something suspicious comes across their desk, from phony checks to forged deeds to missing notarial information. They become even more suspicious when a seller refuses to provide required documentation.
None of the parties in a real estate transaction want to see a deal fall apart. But a title agent’s refusal to proceed in the face of incomplete or improper documentation is a protection for the lender who may be unwittingly putting money on the line in a fraudulent deal.
Title agents who have established effective communication channels with their lender clients can feel confident in reaching out to request additional documentation when they identify an issue in the closing package to ensure it is safe to move forward.
At Kriss Law/Atlantic Closing & Escrow, we have a full range of experienced legal professionals who are here to conscientiously shepherd your transactions safely through the closing process. Contact us to learn more about our services and expertise.