Buyers Must Not Commit Loan Fraud
Buyers are required to provide complete and accurate information when applying for a mortgage loan. This includes both the buyer and any third party that is assisting the buyer in either completing the application, or submitting the application to a lending institution. In this regard:
i. Do not overstate income or assets.
ii. Disclose all loans and debts (including money that may have been borrowed to make the down payment).
iii. Do not provide false letters of credit, cash on hand statements, gift letters or sweat equity letters.
iv. Do not provide false or intentionally inaccurate 1040s, W-2s, 1099s, job letters or leases.
v. Do not accept funds to be used for the down payment from any other party (seller, real estate, sales-person, builder, etc.) involved in the transaction.
vi. Do not falsely state that the buyer is receiving gift funds to use towards the purchase, when, in fact, the buyer is borrowing the funds.
vii. Do not falsely state that a property will be used for primary residence when it actually is going to be used as rental property.
viii. Do not act as a “straw buyer” (somebody who purchases property for another person and then transfers title of the property to that person), nor should the buyer give that person personal credit information for them to use in any such transaction.
ix. Do not apply for a loan assuming the identity of another person.
x. Do not give a real estate purchase agreement to a mortgage broker or a lending institution that is different from the one that will be relied upon at closing. For example, the lending institution is given a real estate purchase agreement for $150,000 but is not aware of a seller’s concession or a purchase price reduction that makes the actual cost to the buyer less than $150,000.
xi. Do not submit, or agree to submit, or assist in submitting, to a mortgage broker or lending institution a false or misleading appraisal of the property to be purchased.
Federal law provides severe penalties for fraud, misrepresentation and conspiracy to wrongly influence the issuance of a mortgage. Buyers can be subject to criminal prosecution for providing false information.
If a buyer is aware of any fraud in the buyer’s mortgage loan application, or if any individual tries to persuade the buyer to make false statements on a loan application, the buyer should then immediately consult with an attorney.