REPORTING FHA MORTGAGE FRAUD:
If the deal sounds too good to be true, it probably is:

U.S. Department of Housing and Urban Devolvement, Office of the Inspector General, Investigations investigates FHA Mortgage Fraud in two distinct areas: Fraud for Profit and Fraud for Housing.

1. Fraud for Housing represents illegal actions perpetrated solely by the borrower. The simple motive behind this fraud is to acquire and maintain ownership of a house under false pretenses. This type of fraud is typified by a borrower who makes misrepresentations regarding their income or employment history to qualify for a loan.

2. Fraud for Profit is sometimes referred to as "Industry Insider Fraud" and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious      properties. There are generally multiple loan transactions with several financial institutions involved.

Typical Fraud Schemes
The most common scheme involves flipping where the property is purchased, falsely appraised at a higher value, and then quickly resold.

Silent Seconds
The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed

Equity Skimming
An investor may use a straw buyer, false income documents and false credit reports to obtain a mortgage loan in the straw buyer's name. Subsequent to closing the straw buyer signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title.

Foreclosure Schemes
The perpetrator identifies homeowners who are a risk of defaulting on loans or whose houses are already in foreclosure. Subjects mislead the homeowner into believing that they can save their homes in exchange for a transfer of the deed and upfront fees.

Straw Buyers (also referred to as the Victim Borrower Scheme)
Unqualified buyers are recruited and convinced through various misrepresentations that they can make easy money through the purchase and resale of a home.

Who pays the price?  Everyone.
Without question, lenders and investors are hit hard by the significant losses. As a result, the consumer ends up paying higher loan rates and fees. And sellers suffer whenever buyers are hindered.  Borrowers who purchase a home that has been flipped, and individuals whose mortgage application has been altered by a broker or other professional often end up losing their home to foreclosure, while others lose down payments and/or their credit is ruined.

What can you do if you suspect FHA mortgage fraud?
Housing and Urban Devolvement, Office of the Inspector General, Investigations, Mid Atlantic District at (410) 962-4502  (covering DC/MD/VA/WV/DE).  Contact Assistant Special Agent in Charge Wallace Merriman.  Email:  wmerriman@HUDOIG.gov.

Outside of the Mid-Atlantic Region, Contact the HUD Office of Inspector General (OIG) Hotline at (800) 347-3735