What Is Mortgage Fraud? Steer Clear of These 3 Offenses

By Cathie Ericson | Apr 12, 2017

There are white lies, and then there’s mortgage fraud. Yes, sometimes it can be hard to tell the difference, but it’s essential for home buyers to understand exactly where the line is drawn, because the consequences can be dire if you cross it. So what is mortgage fraud?

Mortgage fraud is deception about your financial circumstances or how you’re going to use the property that you purchase. If fraud is detected at any time during the mortgage process, your loan will be declined and you will be out any funds you’ve already paid, such as the appraisal fee or your earnest money deposit, says Casey Fleming, mortgage adviser at C2 Financial Corp. and author of “The Loan Guide: How to Get the Best Possible Mortgage.”

And even if your loan closes, that doesn’t mean you’ve gotten away with any deception. If it’s caught later, your lender is likely to call the loan, meaning the entire amount would be immediately due, forcing you to try to refinance or sell the home.

Did we scare you? We didn’t mean to—actually, we sort of did. But we mostly want to impart the seriousness of mortgage fraud. So, read up and make sure you’re not one of the suckers pleading, “But I didn’t know!”

Here are the three main types of mortgage fraud most likely to trip up home buyers.

Offense No. 1: Occupancy fraud

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There are two varieties of occupancy fraud.

1. Purchasing an investment property, but claiming it will be your personal residence. There’s a reason people are tempted to do this: cold, hard cash.

“The cost premium on an investment property is typically 2.5% of the loan amount in up-front fees, or 0.625% to 1% higher in interest rates,” says Fleming.

While those savings are tempting, it’s relatively easy to get caught. Lenders will look closer if the property is multiple units, such as a duplex; considerably smaller or less expensive than your current residence; or located far from where you work. Of course, many people downsize or telecommute, but these factors are likely to raise a red flag.

2. Claiming your home will be a vacation home when you intend to rent it out, or that it will be a primary residence when it’s going to be a second home. Here again, location would raise a red flag, though for the opposite reason: You’re unlikely to buy a second home where you live. If you’re buying in a beach or mountain town, or another obvious resort location that screams “second home,” you’ll have to cite evidence that you plan to live there as your primary residence.

And before you’re tempted to say, “Yeah, I’m living in Hawaii, want to make something of it?,” know that many mortgage lenders will make something of it. One tool they are turning to is the LexisNexis Verification of Occupancy, which uses public and proprietary records to analyze 16 different components of occupancy evidence to try to root out the fibbers. Don’t be one of them.

Offense No. 2: Hiding debt

A lender decides how much home you can afford based on your monthly debt-to-income ratio—that is, the total of all your monthly debts, divided by your gross monthly income. So if you aren’t giving your lender the straight scoop on your debts, it’s basing its assessment on false numbers.

And don’t even contemplate trying to hide what you owe. There are ways of spotting debt that doesn’t show up on your credit report, Fleming warns. For example, most debts require regular monthly payments, which is one reason why your lender is so eager to paw through at least two months of bank statements.

“If they show identical payments going out to someone two months in a row, an underwriter is likely to ask what it’s for, and potentially flag it as debt,” says Fleming.

There are other debts that might not be reported to the credit bureaus, yet still show up on a public record. For example, an IRS repayment schedule for unpaid taxes would not be a “lien” per se that would be reported to the credit agency if you are making your payments on time, but it would still be evident in a records search.

“The bottom line is that a debt other than to your Uncle Bob that you either don’t make payments on or pay in cash, we’ll probably find it,” says Fleming.

Offense No. 3: Hiding your down payment source

We get it: Amassing a down payment can be hard. That’s why it might make sense to borrow money from a relative—especially one who doesn’t ask for interest. However, it still counts as a debt if you are expected to pay it back.

Lenders need to see a complete financial picture before they commit to making you a loan; that includes all the debts you owe, because they affect the funds you have available to make that mortgage payment each month.

Although a lender won’t accept your down payment if it includes a debt you have to pay back, the lender is almost always cool if it’s a gift. So cross your fingers that Mom, Dad, or Uncle Bob are in a giving mood and make sure you have a letter from them specifying they don’t expect the funds to be repaid.

Bottom line?

“There truly are loan programs for almost every person and every circumstance out there,” Fleming says. “You may have to pay a few dollars more each month than you otherwise would, but mortgage fraud is not worth the risk.”

Source: Realtor.com

Think Home Prices Are High Now? Why They’re Likely to Keep Going Up

Think Home Prices Are High Now? Why They’re Likely to Keep Going Up
By Clare Trapasso | May 15, 2017

Buyers might want to sit down for this: Homes flew off the market like the hottest of hotcakes in the first quarter of the year—causing prices to rise even higher than predicted in many parts of the nation.

The median price of existing single-family homes hit $232,100 in the first quarter of the year, according to a recent quarterly report from the National Association of Realtors®. That’s up 6.9% from a year ago—and is nearly double the 3.9% price growth realtor.com® had forecast for 2017.

The NAR report looked at 178 markets across the nation.There were 1.83 million existing homes for sale in the first three months of the year—down 6.6% from the first quarter of 2016.

It’s Official: 2016 Was The Best Year for Existing Home Sales in a Decade
“Prices are increasing faster than we expected them to because of the continual shortage of new homes coming onto the market,” says Senior Economist Joseph Kirchner of realtor.com. “People that had been holding back on buying a home … now have good, steady jobs and are less worried about losing their jobs and hence are going into the housing market.”

If the shortage of homes continues, prices could rise 7% to 8% year over year in 2017, he says. Ouch.

That means buyers on a budget “will be able to afford one less bedroom [or need to] accept a house with a longer commute,” Kirchner says.

The first quarter of the year marked the strongest quarterly sales pace in a decade, according to the report.

“Prospective buyers poured into the market,” NAR’s Chief Economist Lawrence Yun said in a statement. “Those able to successfully buy most likely had to outbid others—especially for those in the starter-home market.”

Prices went up in 85% of those metros, which are highly populated areas made up of one or more city cores surrounded by suburban and rural communities. That’s down slightly from 89% in the previous quarter, but 30 metros did see double-digit price hikes in the first three months of 2017.

“Several metro areas with the healthiest job gains in recent years continue to see a large upswing in buyer demand but lack the commensurate ramp up in new home construction,” Yun said. “This is why many of these areas— in particular several parts of the South and West—are seeing unhealthy price appreciation that far exceeds incomes.”

Four of the five most expensive markets were in California. Silicon Valley’s San Jose took the lead, as the median existing single-family home came with a $1,070,000 price tag. The metro was followed by San Francisco, at $815,000; Anaheim, CA, at $750,000; Honolulu, at $746,000; and San Diego, at $564,000.

Overall, the West was also the most expensive housing region. The median price for an existing single-family home was $342,500 in the first quarter of the year. That’s up 8.4% year over year.

Homes weren’t cheap in the Northeast either, at a median $255,000. They were up 2.2% annually.

Prices in the South rose 8.8% year over year, to hit $209,000.

The most affordable region was the Midwest, where buyers could snag a property for a median $176,600. But prices were 5.7% higher annually.

“You can get a much nicer home here than in many places in the country” for quite a bit less, says Lincoln, NE–based Realtor® Ron Herms, of Sellstate Performance Realty. “A lot of other states in the Midwest are going to be similar. … [And] the quality of life in the Midwest is very good.”

The cheapest metros were Youngstown, OH, at $79,200; Cumberland, MD, at $81,800; Decatur, IL, at $86,100; Elmira, NY, at $90,000; and Binghamton, NY, at $91,200.

Source Realtor.com

Existing-Home Sales Hit Highest Numbers Since Recession

By Clare Trapasso | Apr 21, 2017

The spring home-buying market was off to a strong start in March as buyers closed on the highest number of existing homes in a decade. And that’s despite the lack of residences on the market.

Sales of existing homes (that is, ones that have previously been lived in) hit about 5.71 million last month, according to the seasonally adjusted numbers in the most recent National Association of Realtors® report. That was a 4.4% rise from February and a 5.9% increase from the same month a year earlier.

“Sales are the highest since the recession,” says Joseph Kirchner, senior economist of realtor.com®. The last time they were that high was in February 2007, when 5.79 million existing residences were sold. However, it’s still short of the peak of 7.25 million sales in September 2005, the height of the market.

U.S. Home Sales Were Up in January—Except in One Unexpected Region
But “the supply of homes on the market is getting tighter and tighter,” he adds. “That means home prices will continue to go up and affordability will continue to go down, and it will be more difficult for home buyers to find a home that meets their needs.”

However, the market is great for those sticking a “For Sale” sign in their front yards. “Their selling price will be high, and they’ll be able to sell very quickly,” Kirchner says.

And the climbing prices show no signs of slowing down. The median price on an existing home rose nearly 3.6% from February to March, according to the report. It was also up 6.8% from the same month last year.

But existing homes are still significantly cheaper than newly constructed homes—by about 25.3%. They went for a median $296,200 in February, according to the most recent data available from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

All types of homes are flying off the market. Buyers snapped up more single-family homes, those in-demand abodes that are often, but not always, standalone structures with yards out back. Sales were up 4.3% from February and 6.1% from the same month in the previous year.

They sold for a median $237,800, up 6.6% over the same month a year earlier.

Aspiring homeowners and move-up buyers also signed on the dotted line for more condos and co-ops. Both monthly and annual sales rose 5% in March. Prices rose even faster, at 8% annually, to reach a median $224,700.

“Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain,” NAR Chief Economist Lawrence Yun said in a statement. “Sales will go up as long as inventory does.”

Around the country, monthly and annual sales of all kinds of homes were also up—except in the West. The number of existing homes sold in the region, home to pricey cities like San Francisco, Denver, and Seattle, dipped 1.6% from February, to 1.22 million, according to the report. But they were still up 5.2% year over year.

Prices in the West rose 8% annually to hit a median $347,500, making the West the most expensive region in the nation.

Sales shot up the most in the Northeast, rising 10.1% from February and 4.1% from March 2016. The 760,000 homes sold for a median $260,800, up 2.8% annually.

The number of homes sold in the Midwest reached 1.31 million in March, rising 9.2% month over month and 3.1% year over year. The median price also rose 6.2% annually, reaching $183,00.

Sales in the South reached 2.42 million in March, increasing 3.4% from February and 8.5% from the same month a year ago. Prices also went up 8.6%, hitting a median $210,600.

Source Realtor.com

How Long is a Pre Approval Good For? What is a Commitment Letter?

Typically 60-90 Days a pre approval is good. If it goes beyond that timeframe the lender can issue you another based on your “current debt status”. Please keep your “debts at a minimum through this process”, if not you will throw the numbers off (“debt to income ratio”). Ensure you shop with a lender that you feel very comfortable with and best options to suit “your needs”. I have several lenders in my database I feel comfortable with so my work with you will not be in “vain”. Try not to get confused with all the hype and mail, many times there are hidden clauses (“junk fees”) before approaching them. Pre approval is not the same as a commitment letter, some banks do not do this letter anymore and do not get this mixed up with a pre approval. (“They just notify you are clear to close”). A commitment letter is nothing more than you have cleared all of the open items required by the underwriter and they are now committing a loan to you to close on your new home. Also I have an excellent lady that can grow your credit over 700 ask me how? I am living proof!

Source Kevin Strawter Great House Pro’s Inc.

The mortgage application process has changed

NEW YORK – May 10, 2017 – If you’re looking for a mortgage, there’s one less reason to walk into a bank these days. Alternative mortgage lenders “non-bank companies without customer deposits” are transforming the mortgage industry. Their goal: to offer mortgage rate transparency and help you complete the home loan process quickly, efficiently and mostly (if not completely) online.

The biggest banks, once major players in the $1.5 trillion mortgage industry, have backed away from a large portion of the business, citing low profit margins and high legal risks. It’s a result of the enhanced regulatory environment that followed the 2008 housing meltdown.

A number of new players jumped into the void – alternative lenders testing new business models and leveraging technology to improve the process of getting a home loan or mortgage refinance:

Marketplaces and brokers assist potential borrowers shopping for mortgages and the best mortgage rates.

Online mortgage lenders seek to shorten the home loan process.
Non-bank lenders offer solutions to credit-challenged consumers.
But the structure and capabilities of these alternative lenders vary widely. Here’s how to navigate the field.

Marketplaces and brokers are mortgage middlemen

The easiest way for tech startups to enter the mortgage market is by serving as a middleman. So that’s what you’ll encounter most in your search for an online mortgage.

Mortgage marketplaces, like LendingTree, Mortgage Hippo, Zillow and eLoan, are lead generators for loan originators. Here’s how that works: Their mortgage rate algorithms take your basic application info and present you a roster of potential lenders. You choose one, or several, of the rate options, and the referring marketplace site receives a fee for the lead. You then complete the process with the lender.

Online mortgage brokers offer another twist on the process. Companies like Sindeo provide a concierge service, with advisors guiding you through the home loan selection process. It’s more of a hands-on process, in which the broker works closely with you and the lender to complete your loan package.

Online alternative mortgage lenders streamline the process

Alternative lenders are online mortgage originators that are becoming more of a force in the industry. In fact, the largest of them, Quicken Loans, has become one of the largest mortgage lenders in the country. And the company is looking to become even more entrenched with its recent introduction of a ‘Rocket Mortgage’ service, promising full mortgage or refinance approvals online in as little as eight minutes.

That kind of near real-time approval is an example of how radically the mortgage process is changing. Next-gen lenders strip away layers of delays built into the old system by using automated loan-decision algorithms, electronic document gathering and secure online communications.

Seeing an opportunity to shave off a sliver of the monumental home loan market, new players are making a move to mortgages. Online student-loan refinance service SoFi now offers mortgage loans. And in just five years, Loan Depot has grown to 5,000 employees, offering mortgages as well as consumer loans to residents in all 50 states.

Another example is Lenda, a recent addition to the home loan landscape, which so far serves only a limited number of states but is a direct online lender offering purchase and refinance loans.

Non-bank alternative lenders cater to those with less-than-perfect credit

In some ways, the mortgage industry is coming full circle, back to where it started. Wells Fargo, JPMorgan Chase, Bank of America and other huge lenders “battered by Justice Department fines, federal lawsuits and growing regulation as a result of the housing crisis” are shying away from mortgage lending, especially FHA loans, which have long catered to first-time homebuyers and borrowers with lower credit scores. As more of the large, national banks move to lending only to the most-qualified borrowers, community home lenders are filling the void.

Non-bank lenders are much like the original mortgage bankers; many are locally owned and family-run businesses serving their hometowns. These smaller lenders often face fewer federal regulations and still welcome borrowers with less-than-perfect credit, and they have bolstered the FHA-backed lending that big banks have been avoiding.

Credit unions also play a growing role. They originated more than 8 percent of U.S. mortgages in 2015, nearly double their amount in 2010, according to the CUNA Mutual Group.

There are non-bank mortgage lenders with national footprints, such as PennyMac, but just like their local counterparts, they are built more for phone and face-to-face transactions than for a strictly online loan process.

You have more mortgage options than ever

Alternative mortgage lenders now account for almost half (45 percent) of all home loans, according to the Federal Reserve “the largest share in 20 years. These originators are transforming the mortgage loan process with faster approvals plus online application and document processing, and they are powering a more competitive market.

But getting a mortgage online is not always strictly a keyboard- or smartphone-only transaction. While the paperwork process is moving more and more to e-documents, with some online services you’ll still have to visit a closing attorney or notary to finalize the loan.

Choosing whether to go with a mortgage middleman or a direct lender is a personal choice, based on your comfort and familiarity with the home loan process and how much guidance and advice you prefer.

But it’s empowering to know that when it comes to financing a home, you have more options than ever.

Copyright © 2017 The Steuben Courier Advocate, Hal M. Bundrick, CFP. All rights reserved. Hal Bundrick is a staff writer at NerdWallet, a personal finance website.