Monday, October 22, 2007

Mortgage Fraud - Fake Self Employment

False employment on mortgage applications is rampant. Fake employment is being used on mortgage applications far more frequently than you would think is even possible. I have seen it over, and over, and over, and over again. As I have said before, Mortgage Fraud is a huge problem in the current housing market. With home values on the rise, borrowers have a more difficult time obtaining financing. The fake employment problem arises when borrowers do not qualify for financing with their legitimate employment, income and assets. Here are some typical scams I have seen with my own eyes. Fake Self Employment: Borrowers say they are self employed in order to state that they make more money than they actually do. This works particularly well on stated income loans, where the borrower is not required to prove the income. the idea is that lenders will not believe that a janitor makes enough money to pay a high mortgage payment, but if that same person owns his own cleaning business.....well then he probably can! This scam is pulled off by placing an ad for a fake company in 411, and by getting a tax preparer or CPA to write a false letter stating that the borrower has indeed filed a schedule c for the past few years, and is a self employed individual. The 411 listing is cheap, $10-$50, and fake letters can be found for as little as $100. Not sophisticated but highly effective when dealing with lenders who don't check and don't care. I know of a few lenders, not in business anymore, that were allowing this "Self Employed" Scam fly through the system with fake reference letters instead of the CPA letter. Something that can be typed up on Word in a few minutes. While other lenders were allowing digital photos up self employed borrower's work vehicles, for example a van for a cleaning company. Surprisingly a lot of the vehicles looked oddly similar. Why you ask did they look so similar? Because the brokers, and borrowers were using the same photo and were taking adobe photo shop and changing the name for new applicants. The lenders knew and looked the other way. Why? Because they were making boatloads of money.

Below is a sample of a portion of the 1003, also known as a mortgage application.


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