FHA Loan Fraud Attorneys
If you suffered losses due to FHA loan fraud, do not hesitate to contact the conspiracy and fraud attorneys of Wallace Miller. We can investigate your case and determine whether you can join a class-action lawsuit against the fraudulent lender. You might be entitled to compensation for expenses incurred and other financial losses.
A Federal Housing Administration loan is a mortgage the government insures and a bank or another lender issues to a prospective home buyer. FHA loans are more desirable than conventional ones because they require a lower minimum down payment. Applicants’ credit scores can also fall below the usual requirements.
Unfortunately, some lenders will take advantage of loan applicants and borrowers by falsifying documentation, engaging in bait and switch scams, or inflating an appraisal estimate. When you take out a loan backed by the government, you probably don’t think an entity or individual will mistreat you. Most people trust that they will receive the services they need without suffering harm.
At Wallace Miller, we understand the devastating feeling of discovering that FHA fraud occurred. When a lender, bank, or another institution engages in fraudulent activity, it can significantly impact your finances. You could lose money and struggle to regain good economic standing. You should not face the consequences of a fraudulent company’s actions. Let us fight for your rights and the compensation you deserve.
Call Wallace Miller at (312) 261-6193 for your free consultation with one of our knowledgeable and dedicated FHA loan fraud attorneys.
Traditional Mortgages vs. Reverse Mortgages
A traditional mortgage, also called a forward mortgage, is a loan people take to buy a home or refinance a current loan. Typically, the borrower provides a down payment between five percent and twenty percent of the property’s value. The loan covers the remaining amount owed.
Lenders often require applicants to have a minimum credit score to qualify for a traditional loan. Borrowers must provide documentation that verifies their income, such as pay stubs, to prove they can meet the financial obligations of the loan.
Loan agreements include terms that require the borrower to pay a specific amount each month over a specified period to repay the lender. Borrowers must also pay an interest rate that varies depending on the type of loan and market conditions.
Reverse mortgages, also called Home Equity Conversion Mortgages (HECMs), are loans insured by the Federal Housing Administration (FHA). The federal government regulates reverse mortgages to prevent predatory lenders from taking advantage of vulnerable borrowers, such as the elderly.
Homeowners at least 62 years of age can benefit from a reverse mortgage. They can use the loan to pay off their current mortgage, eliminating monthly payments. When they die, the house becomes the lender’s property.
One of the most attractive factors of reverse mortgages is that they have minimal eligibility requirements. Determining eligibility does not require using the applicant’s credit score.
Applicants often secure a reverse mortgage loan by using their current home as collateral. However, they must pay homeowner’s insurance, property taxes, and related expenses during the term of the reverse mortgage.
Instead of paying the lender, borrowers receive payments as one lump sum payment upfront or on an adjustable-rate based on the chosen terms. The lender considers the loan repaid when the last occupant in the home moves out or passes away, and the home reverts to the lender.
Understanding FHA Mortgage Loans
The government insures FHA loans. However, the money for a borrower’s mortgage doesn’t come from the FHA. Instead, a lender approved by the FHA issues the loan.
Borrowing money through an FHA loan is typically simpler than applying through a bank or another financial institution for a traditional loan. Applicants don’t have to meet strict requirements. They can have credit scores as low as 500 and provide lower down payments than traditional loans require.
According to the Mortgage Insurance Program, you can provide a 3.5 percent down payment and borrow up to 96.5 percent of your home’s value if you have a credit score of at least 580 as of 2022. Applicants with a credit score between 500 and 579 can qualify for this type of mortgage but must make a ten percent down payment.
Common Types of Mortgage Lender Fraud
Every mortgage lender must comply with federal and state laws when modifying, processing, and refinancing loans for homebuyers. Unfortunately, some lenders engage in fraudulent activity, harming borrowers. The most common types of mortgage lender fraud are below.
Negligence occurs when a mortgage lender’s actions fall below the expected standard of care. For example, a negligent lender might lose vital loan documents or sign off on a borrower’s application despite knowing the information it contains is false.
According to the Federal Deposit Insurance Corporation (FDIC), creating a single definition of predatory lending is impossible due to the complexities of mortgage loans. Typically, predatory lending involves fraudulent or deceptive acts under consumer protection laws.
The FDIC has determined that at least three common features of predatory lending exist:
- Using coercive or deceptive actions to convince a borrower to refinance their mortgage so the lender can charge high fees and other costs
- Concealing important information or misleading the borrower regarding the loan
- Using the borrower’s assets instead of income to make the loan unaffordable
Loan Modification Fraud
Sometimes lenders will negotiate the terms of a mortgage with the borrower. Loan modification scams involve promising to negotiate a better term for a fee on the borrower’s behalf. However, once they receive the fee, they don’t negotiate with the lender at all or don’t negotiate in good faith, which could result in unfavorable terms.
The results of an appraisal help lenders determine loan limits, so they don’t lend more money than the value of the home. Lenders who engage in this type of fraud will artificially inflate the appraisal, so the value appears higher.
Inflated appraisals might be the borrower’s idea so they can secure the loan they need. However, lenders and appraisers can be liable for participating in fraudulent activity.
Reverse Mortgage Fraud
Reverse mortgages are only available to homeowners who are 62 years old or older. Schemes involving reverse mortgages often occur because lenders consider the borrowers vulnerable. Lenders believe seniors won’t notice what’s happening or report the fraud.
A common scheme is when someone obtains the loan in the homeowner’s name but keeps some or all of the money paid by the lender.
Homeowners at risk of defaulting on a mortgage or already in foreclosure might be able to negotiate with the lender to avoid foreclosure. A person participating in the scheme might convince the homeowner to transfer the title of the property to them or another party and promise they can buy it back later. Instead of holding onto the property as promised, they sell it and keep the proceeds instead of paying the lender.
Who You Can Hold Liable for FHA Fraud
You should contact Wallace Miller immediately if you believe you are the victim of FHA loan fraud. We can review the circumstances to determine whether you have a case to pursue or qualify for a class-action lawsuit against the fraudulent lender.
You could also submit a report to the Federal Trade Commission (FTC). They don’t investigate individual cases involving mortgage fraud, but a written report of what happened could help others in the future, especially if a lender commits mortgage fraud that affects a large number of people.
People who commit FHA fraud have access to insider information. They can use their skills, knowledge, and connections to commit fraud. These individuals often include:
- Loan originators
- Bank officers
The goal of the fraudulent activity isn’t to obtain a home. Instead, perpetrators use their unique circumstances to steal profits from homeowners, borrowers, and lenders. Most victims have mortgages insured or guaranteed by the federal government through the FHA. The False Claims Act (FCA) oversees and enforces regulations regarding fraudulent conduct.
The FCA also protects whistleblowers. Whistleblowers who report a coworker’s, employer’s, or another party’s illegal actions are under the protection of federal law. Employers are not allowed to terminate employment, harass, discriminate against, or engage in other retaliatory acts against an employee who files a report or lawsuit under the act.
Common examples of FHA loan fraud reported by whistleblowers include:
- Overstating the applicant’s income
- Failing to meet the underwriting requirements of the U.S. Department of Housing and Urban Development (HUD)
- Falsely certifying that a loan complies with FHA underwriting and credit guidelines
- Misrepresenting the quality of the underlying loan
- Falsely certifying the integrity of the loan data
- Ignoring issues that quality control or compliance staff flags
- Inflating the value of a borrower’s home
- Falsely certifying loans despite ineligibility for FHA insurance
- Ignoring conflicts of interest, such as gifts or incentive compensation
- Claiming reimbursements of unlawful referral fees
- Misrepresenting a borrower’s employment history
- Failing to perform due diligence on an underlying loan
- Using false branch office ID numbers when submitting loans for insurance
- Misrepresenting compliance with requirements and deadlines for mortgage insurance claims
- Falsely certifying that a loan meets eligibility requirements by the FHA
You can pursue a whistleblower claim on behalf of the government. Once you submit the lawsuit, the government can review it to determine whether they want to intervene and take the lead on the case. You can stay involved in the process, but the government will take on the primary responsibility. If the lawsuit is successful, you can receive a percentage of the proceeds the government recovers.
Wallace Miller will be the advocate you need to pursue action against the party responsible for FHA loan fraud. We will provide quality legal representation and guidance during the entire legal process. Our FHA loan fraud attorneys will protect your rights and aggressively pursue the compensation you deserve.
If you are the victim of FHA loan fraud, call Wallace Miller for your free consultation at (312) 261-6193 today.