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.
Protecting yourself from an overvalued appraisal is easy
Be wary of mortgage broker
solicitations.
When you buy or refinance
your home, ask your friends and family for referrals to mortgage services
they have used.
When considering a broker or
appraiser, even one to whom you have been referred, check for proper
licenses and with the Better Business Association and other trade groups
for complaints about the broker or appraiser.
Ask for written documentation
of the appraisal and recent comparable sales information of homes in the
neighborhood.
Don’t be pressured into using
an appraiser suggested by any other party to the process.