Chapter 6 Flashcards
Ethics
Moral principles that govern a persons behavior and conduct
Morality
the principle concerning the distinction between right and wrong
Transaction Fraud
The nature of the transaction is mirepresented.
Identity Fraud
When an applicant’s identity and/or credit history is altered, stolen, or fabricated to obtain a mortgage.
Occupancy Fraud
Mortgage applicants deliberately misrepresent their intended use of the property.
Property Fraud
Information about the property or its value is intentionally misrepresented.
Straw buyers
Individuals are used by fraudsters to obtain mortgages.
Air Loan
A loan that has a straw or non-existent buyer, or a non-existent property. Based on something pulled out of thin air.
Chunking
The sales of properties at artificially inflated prices are pitched as investment opportunities to naive real estate investors. Usually, promise improbably high returns and low risks.
Buy and Bail
This occurs when a homeowner is current on their mortgage, but the value of their home has fallen below the amount owed (underwater) so they apply for a purchase money mortgage on another home. After the new property has been secured the borrower will allow the first home to go into foreclosure.
Foreclosure Rescue Scheme
takes advantage of borrowers who are in the process of foreclosure or about to foreclose. Promises to help the borrower avoid foreclosure often take payment from the borrower, but the borrower never receives services and loses their home.
Unauthorized Fees and Payout Characteristics
A type of foreclosure rescue scheme where an advance fee scheme is perpetrated by a foreclosure rescue specialist where fees or payouts that were not approved by the servicer agreeing to the short sales are reflected on the HUD-1 or Closing Disclosure.
Mortgage Assistance Relief Rule (MARS) (Reg O)
Makes it illegal to charge upfront fees and requires specific disclosures in ads for mortgage assistance relief providers. These rules protect distressed borrowers from foreclosure rescue schemes.
According to MARS what must a mortgage assistance relief provider clearly and prominently disclose?
-Total cost
-That they can stop using their services at any time
-That they are not associated with the government or the distressed borrower’s lender
-That the distressed borrower’s lender may not agree to change the terms of their mortgage
MARS rule requires mortgage assistance relief providers to do what in regards to advising about paying the mortgage or communicating with the lender?
-If they advise someone not to pay his or her mortgage, they must disclose the negative consequences that could result
-It is prohibited to advise the borrower to stop communicating with their lender.
Short sale
A means of selling the house for less than the outstanding mortgage on it. Homeowner initiates but the lender must sign off on it.
Short sales fraud
This is when perpetrators profit by concealing parties to the transaction or contingent transactions or falsifying material information so the servicer cannot make an informed short sale decision.
non-arm’s length short sale transaction
Occurs when the borrower has a direct relationship or business affiliation with the seller. in a short sell the buyer and seller are required to sign an arm’s length affidavit to protect against a family member buying the home at a reduced cost while allowing the borrower to remain living there.
Loan Modification
A permanent restructuring of a mortgage. Typically allows the borrower to have more affordable payments.
Loan Modification Scheme
A company claims they can assist homeowners facing delinquency or foreclosures and help them keep, stay in, or stay in longer their home.
Typically charge high upfront fees, fail to execute, and put the homeowner at a much higher risk of losing their home.
