Fighting Mortgage Fraud
As a part of my practice, I’m a Delaware real estate attorney. In light of what’s been going on with our economy, and all the blame that seems to have been placed on lenders giving mortgages to people who couldn’t afford the payments, I thought I’d tell you about a refinancing settlement I had a while back that’s a perfect example of what happened.
One of my clients who wanted to refinance his mortgage submitted an application to a mortgage broker. The mortgage broker’s job was to find a lender who would approve the loan. In no time at all, the loan was approved, and my client and his loan officer from the mortgage broker came to my office for settlement.
During the settlement, one of the documents my client had to sign was the final application for the loan. This is a routine document to sign, and it certifies that the information about my client that the broker submitted to the lender was true. As my client looked at the application, something jumped off the page. His income was grossly overstated. He simply didn’t make anywhere close to what the broker had put on the application.
My client brought this to the broker’s attention, and the broker told my client to sign the application any way because it was a no income verification loan. Realizing what was happening, I asked the broker a series of questions in front of my client which resulted in the broker saying that he was aware that the income reported on the application was not correct, but there was no reason to worry about it because the lender was not going to attempt to verify his income. My client said he was not comfortable with this, and I pointed out to my client that regardless of whether anyone checked it for accuracy, the lender was relying on the truth of the application in deciding whether to lend the money. I also pointed out that there was a paragraph below the signature line advising that there were civil and criminal penalties for making a false statement on the application. When the broker continued to encourage my client to sign the form, I informed him that my client and I were not about to help the broker commit a fraud on the mortgage lender, and that settlement was canceled.
I wonder how many other mortgage loans this broker and others like him were involved in?
This story is just one of the reasons to make sure you have an experienced and honest Delaware real estate attorney when you go to settlement.
