You’ve heard the term morgage fraud a lot in the news lately, and it seems that incidences of morgage fraud have increased at a pretty staggering rate. There are several different types of morgage fraud and all of them have stiff penalties if committed. In reality, it’s just a term to describe a broad number of unlawful dealings where the intention is to omit or misrepresent information on a mortgage loan application. Some people do this to get approved for a larger loan than what would have been granted, or some do it to just simply get approved.

Anyone from the buyer, to the realtor, to the escrow attorney may be involved in the criminal act of morgage fraud. It’s not uncommon to have more than one person involved or perpetuating the fraud itself. Fraud rings are deceitful stakeholders that encourage and assist a borrower into lying about their income, employment, or even their liabilities with promises of compensation after the transaction closes. Whether you have full disclosure of the fraudulent act itself or not, you are the one who signs and is responsible for the information submitted to the lender, and are therefore held accountable. Be sure to have a clear and conscious free mind of the personal information you are submitting and morgage fraud are two words you won’t ever have to deal with.

Even though morgage fraud affects the lender more so than the borrower, the borrowers still feel the effects of fraud through the increased housing prices.  orgage fraud could be happening right in your own neighborhood and you’ve been paying for it with high property taxes on inflated and untrue assessments. The government is working diligently to catch and prosecute the guilty parties, and the job appears to be more overwhelming by the day. It’s definitely a bigger issue than most believe and its ripple effect is suddenly being felt in our economy. The best advice is to be diligent, informed, and honest when applying and don’t get suckered into any schemes that will possible lead to jail time.

Morgage insurance should not be mistaken as mortgage life insurance which is a completely different. Mortgage life insurance doesn’t involve the banks. Morgage insurance is an insurance program in which an insurance company will cover the risk that you may be unable to pay. 

When you receive a mortgage, the lender will usually assume all of the risks associated. If you are considered a high risk borrower, you will likely be asked to take out morgage insurance so the bank can limit their risk.

One of the easiest ways to determine if insurance will be required is based on your down payment. Banks typically require insurance for all borrowers if they can not afford a 20% down payment. Just like any form of insurance you will have some payments to make to the insurer and this amount will be added to your monthly payment plan through the lender. This is why a morgage calulator is only away to estimate because the monthly premiums for morgage insurance vary from company to company and of course from case to case. This insurance while protecting the lender does have the advantage of allowing you to get a mortgage with a limited down payment as opposed to a 20% down payment which is a financially sound decision for many people.