- The Washington Times - Friday, June 21, 2002

A colleague called me with a peculiar but unfortunately not uncommon story about how several lenders were asking her to provide false information on her mortgage application.

She wants to move into a new home first, then sell her current home. That means she would need what is called a "bridge loan," under which she would make payments on both houses with one loan until the original home is sold.

A bridge loan isn't used very often. Even so, three of four lenders with whom my colleague talked asked her to supply them with a letter stating that she and her husband had rented out the first home, and thus the loan would be approved. One problem there was no renter. It would be a fabrication.

A single parent I know was asked by her then-estranged husband to write a letter stating that she was receiving less money per month for spousal and child support than she actually was receiving so the estranged spouse would be able to qualify for a larger loan. The borrower had been prompted by his loan officer to get the letter.

Both of these are instances of fraudulent loan practices. Bottom line: The loan professionals aren't acting professionally and are putting their customers at risk if their loan applications ever get audited.

Of course, the borrowers are the ones who would be submitting both of the documents, so the burden of proof would fall on them. Saying to an investigator, "The loan officer made me do it" just won't cut it.

The Mortgage Bankers Association of America (MBAA) (www.mbaa.org) recently introduced an education campaign called Stop Mortgage Fraud. The campaign has elicited endorsements from the U.S. Conference of Mayors and the U.S. Department of Housing and Urban Development.

The examples above fall under the first sign of fraud: Were you encouraged to include false information on your loan application? Below are a few more questions that could point to fraudulent practices by the lender.

• Were you asked to leave signature lines or any other important line of any form blank? Did the lender or broker alter any information you entered on your loan application?

• Are all the required disclosures in your file? If you are missing the Good Faith Estimate, Special Information Booklet, Truth in Lending or HUD-1 Settlement Statement, contact your lender to have these forms included in your file.

• After you have refinanced your loan several times, has the monthly payment kept increasing or the total amount owed kept rising?

• Did you incur any unexpected costs at settlement that were not explained to you before settlement?

• After settlement, were you surprised to find the monthly payments on your mortgage loan were higher than you had anticipated based on the initial disclosures?

Obviously, human error is at times involved in the loan application process. When you're faced with papers a couple inches deep to sign, it's not unusual to glide over a form without getting a signature in place. A busy lender might have a form missing from the package that he or she doesn't realize is missing, and thus the lender might ask you to fill it out later. However, if the lender's mistake ends up costing you money, that could be a sign that the missing signature or paperwork was intentional to push up the lender's profit margin at your expense.

If you think you have been victimized by an errant loan officer, you're no longer out of luck. MBAA has established a Web site where consumers can report abusive lending practices. See www.stopmortgagefraud.com or call 800/348-3931 to get information on what steps to take to file a complaint.

M. Anthony Carr, director of communications for the Northern Virginia Association of Realtors, has written about real estate for more than 12 years. Reach him by e-mail ([email protected]).

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