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Freddie Mac and VMP go bilingual

National Mortgage Professional
May 09, 2005

Fraud: It's not worth itClark Gramelspachertype keywords here..SEPERATE BY COMAS ONLY(,) As a lender representative, I can tell you that I see my fair share of fraud I mean, doctored W-2s, VOEs, VOMs and even stretched appraisals. Scanning money orders or canceled checks to "create" a rental or mortgage payment history is also on the rise. I have to believe that the people committing these acts have no idea how serious a crime they are committing. These are felonies! Who Is Committing Fraud? I believe there are three categories of offenders. I. Rookies The young, starving loan officer is a typical offender. They only have a few loans in their pipeline and must close every one of them just to make enough money to pay their bills. They know what they're doing is wrong but don't realize just how illegal it is. They justify their actions by making a borrower happy and putting money in their pocket. II. The Improperly Trained There are many new loan officers and processors who were taught that "it's no big deal" to "slightly alter" documents, and that "everybody else" does it. Plus, it makes the borrower happy. III. The Intentional Expert Finally, there is the experienced loan officer who knows exactly what they're doing, has elaborate scanners and software to accomplish it, and knows just how illegal it is but continues to do it anyway. Top Three Fraud Categories The most common act of fraud committed may surprise and even scare you! I. The Bait and Switch Maneuver This happens when a loan officer promises rates and terms that are more favorable than what can be delivered. This leads to closing table horrors, not to mention unhappy and vengeful borrowers who file a lawsuit against you and your employer for misrepresentation of a loan. The borrowers are winning these lawsuits. II. Altering or Creating Documents This act is an obvious form of deceit. Anytime you change something on any loan document, you are committing a federal offense. You cannot alter a 1003, W-2, VOE, VOM or 1040; forge a signature; or create bogus money orders or canceled checks. These are all felonies! III. Stretching or Altering Appraisals Intentionally misrepresenting property values or property conditions is fraud. Even though a loan officer will claim no responsibility and leave the appraiser "holding the bag," if it can be proven that the loan officer had knowledge of the misrepresentation, they will also be guilty of fraud. What Are the Penalties? These acts of fraud are classified as Class D felonies. Listed are the penalties for each count. *One year in prison *$10,000 fine *Payment of three times the amount of damages *Court costs *Attorney fees Remember, these penalties are for each individual act of fraud. So, if you're guilty of eight or nine counts, multiply the aforementioned penalties accordingly. If you are found guilty on a pattern of multiple counts of fraud, there are state statutes that could classify your business as a "racketeering and corrupt organization." This means that you're in the business of committing fraud on the public. Your whole business is deemed fraudulent, and your business and personal property is seized. What's the Answer? Internal compliance. Each broker/owner should be aware of any "problem" loan officer. Even though the broker/owners cannot oversee everything, they need to stress legal and ethical practices for everyone's sake! If the word "felony" scares you, it should! Committing fraud in any form is just not worth it. The penalties involved far outweigh the "justifiable reasons" for doing it so don't. There is plenty of good business out there for everyone. Just go and find it. Clark Gramelspacher is Affiliate Director and PAC Secretary of the Indiana Association of Mortgage Brokers. He may be reached at (888) 387-0374 or e-mail at [email protected]
May 09, 2005
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