While the presence of one or more of these red flags doesn’t automatically mean that there might be mortgage fraud, further investigation is warranted. Several in the list are ‘common-sense’ warning signs. However, the slack lending standards that many banks and mortgage lenders employed the past several years, require the rest of us to promote and reiterate the red flags so that our industry can regain the public’s trust.
- Inconsistent ownership among supporting loan paperwork
- Payoffs from seller’s funds on HUD-1 being made to non-lienholders
- Not enough funds to close documented
- More than five mortgage inquiries listed on the credit report in the last 90 days
- Unusually high income for job description
- Bank statement deposits don’t match payroll dates
- Seller is a corporation
- Inconsistent information on the mortgage application (1003, sales contract, HUD-1)
- Change in ownership in the last 12 months
- Crossed out information on the loan documentation
- Inability to independently verify place of employment
- Borrower is a renter and is buying the subject property for investment purposes
- Appraisal photos don’t match subject or the comps used to define the subject’s value
- Appraisal order date is prior to the application date on the mortgage application
- Bank statements missing borrower name or address, NSF charges with high balance
Source: Adapted from The Prieston Group