Home equity remains the largest portion of most people's net worth and most Americans see their homes as their most important investment. However, even a sophisticated, intelligent home owner can fall victim to mortgage fraud. The results of such fraud can be devastating and, in the worst cases, even lead to the loss of the person’s home.

Today's home buyers must protect their own interests

The home mortgage playing field is increasingly complicated, competitive and crowded. While the vast majority of players are honest, all of those involved – lenders, brokers, appraisers, closing agents, the home seller and the home buyer – have conflicting interests. Quite often, no one is looking out for the interest of the home buyers who are often the least real estate savvy participants. This is particularly true now that almost 65% of home loans are negotiated through loosely regulated third party brokers. Therefore, it is very important that home buyers look out for themselves.

One of the easiest types of mortgage fraud to perpetrate is an overvalued appraisal. Almost half of all home appraisers have complained that they have been pressured to overvalue homes. And home buyers, eager to get the most home possible at the best possible terms, often accept these appraisals without fully understanding them. In the short term, an overvalued home may even seem desirable. If buyers should want to refinance or sell their homes, they would find themselves in the hole financially. There would be less equity in their homes than the homeowner thought. In some cases, the homeowners might even find themselves with an “upside down” mortgage; that is, owing more than the home is actually worth. In the most severe cases, an overvalued appraisal can even lead to foreclosure.