The reality of becoming a homeowner is an integral part of the “American Dream” most of us yearn for. Over the past two years alone, 40,000 people in Miami-Dade County have achieved this most important aspiration. 

However, as many of us celebrate this accomplishment, others take the opportunity to partake in fraudulent schemes in order to defraud financial institutions of thousands of dollars.  According to the Mortgage Asset Research Institute, these illegal schemes have now made our state number one in the nation in complaints from lenders.  In 2006 alone, the mortgage fraud crisis cost the lending industry between $946 million and $4.2 billion. 

We as consumers are affected by this crisis because lenders must recoup their losses in order to remain in business.  The result is higher mortgage prices, decreased availability of mortgage credit, and decreased loan values.  In addition, since many of these schemes involve artificially inflating property values, we are ultimately hit with higher property tax bills.  Law enforcement has targeted this practice and participation in such activity can now be considered a felony offense.  My office works vigorously alongside other local, state, and federal agencies to tackle these often complex crimes.  The following mortgage fraud schemes are examples of many existent in South Florida today:

Cash Back Scheme – Where the buyer and seller or the buyer and real estate agent deceive the lending institution by inflating the price of the sale.  The seller or the real estate agent gives the buyer a cash rebate that is not disclosed to the lender.  This scheme, which also requires appraisal fraud, results in the buyer or seller pocketing the overage.

Identity Theft – This occurs when a person assumes the identity of a homeowner and takes out a mortgage on their property.

Appraisal Fraud – When the appraised value of a home is deliberately overstated, more money gets acquired by the borrower in the form of a cash-out refinance or obtained by the seller in a purchase transaction.

Employment / Income Fraud – Sometimes borrowers overstate income in order to qualify for a larger loan amount.  This is most often seen with so-called “stated income” mortgage loans, where the borrower declares their income without verification.  Occasionally, it is also seen in traditional full-documentation loans where the borrower alters an employer-issued Form W-2 to overstate his/her income.

With a recent downturn in the housing market, other scams such as foreclosure related fraud are becoming more popular.  Criminals shift their focus with the changing market and begin to prey on desperate homeowners who are trying to save their homes while interest rates balloon on their adjustable rate mortgages.

If you are aware of or have fallen victim to any of these illegal practices, contact your local police department for assistance.  For additional information related to these schemes as well as others that may exist visit the Mortgage Bankers Association of America website at www.stopmortgagefraud.com









By Miami-Dade State Attorney 
Katherine Fernández Rundle