Residential mortgage fraud is on the rise nationwide. In Texas, we have seen an increase in the number of criminal indictments for mortgage fraud. Due diligence will be required of consumers, lenders, appraisers, real estate agents, prosecutors, and Title personnel to identify and combat this growing problem. We offer the following non-exclusive list of 'red flags' that could alert title agents and escrow officers to the potential for mortgage fraud:
- Excessive or undocumented repair bills, consulting fees or marketing fees to be paid outside closing
- Sales price increased shortly before closing with difference to be paid in a note to the seller
- Request to ignore lender's closing instructions or to disburse funds differently than shown on settlement statement
- Last minute power of attorney without explanation
- No funds due from buyer
- Buyer required to use a particular broker or lender
- Cash paid to buyer
- Seller has only had title a short time
- Same notary used on documents executed in different locales
- Chain of title includes broker or lender
Consumers should be diligent so that the dream of home ownership is not shattered by the threat of unmanageable debt and bankruptcy. Consumers should be mindful of things that might occur in the purchase transaction which could spoil if not totally derail that home ownership dream. Therefore, please also share the following suggestions with your consumers:
- Get referrals for real estate and mortgage professionals. Check the licenses of the industry professionals with state, county, or city regulatory agencies.
- If it sounds too good to be true, it probably is.
- Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques.
- Look at written information including recent comparable sales in the area, and other documents such as tax assessments to verify the value of the property.
- Understand what you are signing and agreeing to--if you do not understand, re-read the documents, or seek assistance from an attorney.
- Make sure the name on your application matches the name on your identification.
- Review the title history to determine if the property has been sold multiple times within a short period--It could mean that this property has been "flipped"; and the value falsely inflated.
- Know and understand the terms of your mortgage--Check your information against the information in the loan documents to ensure they are accurate and complete.
- Never sign any loan documents that contain blanks--This leaves you vulnerable to fraud.
- Review your credit report on a yearly basis. You can obtain a free credit report by calling toll-free 877-322-8228, or by going to www.annualcreditreport.com.
If you suspect mortgage fraud, please report it to the FBI, your local district attorney, and TDI's Title Division and Fraud Units. If you have any questions regarding this bulletin, please contact the Title Division at 512-322-3482 or via email at: title@tdi.state.tx.us.
Robert R. Carter, Jr.
Deputy Commissioner - Title