ID THEFT 101
House Stealing: When Identity Theft Leads to Mortgage Fraud
Written by: Dan Kolen | Tue, 04 Jun 2013 16:42:09 +0000
Mortgage fraud resulting from identity theft is devastating. It begins when a crook uses your good name and the equity in your home to make a profit. All of this is done in the dark—behind your back and without your consent.
An identity thief can steal your Social Security number and other personal information, then steal your home equity by refinancing for more than what's owed on your mortgage and taking the extra cash, or obtaining a home equity line of credit, using your home as collateral.
Thieves can even execute fraudulent deed transfers. To do so, the thief uses phony information to transfer the deed to your property into his or her name, obtain a mortgage on the home and then use the money for his or her own financial gain. Since the loan is not paid, your home could end up in foreclosure.
"It's the most egregious form of identity theft," says Curt Novy, a mortgage analyst for the FBI and private lenders. "It amounts to the most money lost, and is the most devastating to individuals."
The targets for the crooks are plentiful. Anyone can fall victim, but you're a prime target if you're financially responsible, have a good credit score and owe little or nothing on your mortgage. Any type of home can be used for the crime, from a vacation property to your current home.
The FBI calls the combination of mortgage fraud and identity theft "house stealing."
To commit the fraud, thieves can reroute your telephone calls, forge your signature, create passwords, make fake IDs and obtain your recent mortgage account history. They want to become you in order to make money off of your home.
The identity thieves speak with lenders—pretending to be you—and then they may buy a new home using your credit, or sell your home and pocket the profits. Or, they may draw the equity out of your home and bleed your finances dry, all without you knowing.
Victims generally have no clue the equity in their home has been taken, or that they owe hundreds of thousands of dollars on a home they don't own, until it is too late.
"The victims may not know what's happened to them until there's a lien on their property, and they find out a deed's been conveyed, that's when the investigation starts," says William A. Anderson, vice president at the National Notary Association. "If someone is going to steal [a person's] identity, they'll want to do it so the victim won't know what's happened until the damage has been done."
They will also put you, the victim, on the hook for the crime they are committing. They'll reap the monetary reward, and you'll be left to clean up the mess.
"Crooks are pretty creative," Novy says. "They're able to find out ways to beat the system and cheat lenders out of money. It's a much more profitable way of robbing a bank."
While they can be charged federally, the potential payoff outweighs the possible punishment for many thieves. Culprits can be scammers from outside organizations, employees at legitimate mortgage companies or even your family members.
"I'm working on a case right now where an 80 year old woman didn't know a family member was taking out a $150,000 mortgage on her home," Novy says. "It happens more than you think."
The end result for you as a homeowner? Your good credit can be destroyed, the equity in your home can be depleted and your hard-earned home can end up in the hands of someone else. You could be put on the hook for tens if not hundreds of thousands of dollars in unpaid debt.
Rebuilding your credit and rectifying your situation does take time, but it is not an insurmountable task. Report the mortgage fraud to credit reporting agencies, notify the fraud department of the company with the fraudulent mortgage and file a police report. Because this is a federal crime, you should also report your case to the FBI.
Remember to keep detailed records of all your communications. And if you suspect a problem, act on it immediately.