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
Who Is Committing Fraud?
I believe there are three categories of offenders.
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
Top Three Fraud Categories
The most common act of fraud committed may surprise and even scare
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
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
*Payment of three times the amount of damages
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]