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Dear Steve,
What are the implications of using false documents to obtain a property, such as the use of an altered W-2 form or
tax return? My payments are current.
-- Randster
Dear Randster,
Much has been written about the role of lending fraud in this ongoing mortgage crisis. But borrower fraud is equally
responsible.
Certainly, originators and brokers were complicit in a high percentage of mortgage-fraud cases. But a
10-year study by BasePoint Analytics found that loans with misrepresentation on the application were nearly five times
as likely to default as honest applications.
Moreover, as much as 70 percent of early stage defaults contained fraudulent information on the original
loan applications, the study found.
Technically, you or whoever the "perp" may be in this instance could get rung up for "supplying false
statements on a loan and credit applications," "making and subscribing to a false tax return" or another similar federal
offense. But given the backlog of more severe mortgage-fraud cases, that's probably not going to happen.
The lender or U.S. Attorney's Office would have to somehow be made privy to this information. (Is some
peeved party, such as an ex-spouse, threatening to out the fraudster perhaps?) Even then, it's very unlikely that anything
would happen unless this case got lumped into litigation.
The lender probably wouldn't come
forward because it might fear being implicated
in additional mortgage fraud. And it's very unlikely
the lender would try to wrest away the home in
this current flat market. It probably has plenty
of seized homes on its rolls already.
Further, the FBI said in May that
it is only pursuing cases of applicant fraud involving
people who were involved in flipping rings, bogus
foreclosure-rescue schemes, identity thefts and
other multiple-victim mortgage offenses -- for
now.
If you or your party opts to take the high road and confess this, find a good real estate attorney first.
I also suggest that whoever did this should keep making those payments on time and think twice before legally signing off
on knowingly deceptive information. Revised federal laws are in the works as we speak. The financial industry even has a
name for these mortgages: "liar's loans." Mortgage fraud, Mr. Randster, is one reason we're mired so deeply in this mess.
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