Wednesday, April 11, 2007

"Straw" Mortgages = Bad Bad News

A new scheme, or perhaps not so new, is out there that fraudulently misleads lenders, buyers and sellers. It's called a "Straw Mortgage" and can work several ways. For example, Blanche Evans of Realty Times listed these (along with others) in a recent article:
  • induce appraisers to inflate property values in order to obtain a larger mortgage loan for the "straw borrower."
  • submit bogus invoices for phantom "upgrades" or "renovations" that falsely inflate the value of the property. This allows the fraudster, "straw borrower," or "investor" to obtain a larger mortgage.
Typically, a straw buyer is someone whose identity is concealed, according to columnist Broderick Perkins. He has another interesting article about how to recognize and avoid fraud.

And right here in our own backyard, a national ringleader was caught in Nashville for mortgage fraud. He's squealing on the people who helped him, so expect a lot of headlines about this. Read about what he did and how he did it from The Tennessean here.

Finally, here's a first-hand example of what happened to a California builder. May the buyer beware.

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