unit 22 Subprime Lending, Predatory Lending, and Mortgage Fraud

Silent second

A property buyer accepts a second mortgage without disclosing it to the original lender. Often used when a buyer can't afford the down payment on a home.

Inflated appraisals

An appraiser intentionally submits a misleading report to a lender that indicates an inflated property value

Nominee loans/straw buyers

Concealing a buyer's identity by using another person's name and credit information to obtain a loan.

Norma, a real estate licensee, is working with the buyers in a transaction. She suspects mortgage fraud. What should she do?

Discuss the situation with her broker.

One common predatory lending practice is to charge fees for unnecessary or ______ loan products or services.

Non-existent

______ make homeownership available for many who otherwise could not qualify for a mortgage loan.

Subprime lenders

Which of the following actions might be considered a red flag signaling mortgage fraud?

Your buyer requests a specific appraiser.

Red Flags

-Large adjustments to sales price without supporting comparable data, or a request that the list price be changed to reflect appraised value. -The buyer requests a particular appraiser. -The seller contributions include large décor or improvement allowances. -The mortgage broker refers a pre-qualified buyer to an agent. -It's suspected that the buyer doesn't intend to live on the property. -The buyer's credit history is limited and provided by companies that either charge high interest rates, or the buyer's loan payoff history doesn't include interest payments. -The stated income is unrealistic. -Drastic increase in income from a recent raise or new job. -Missing or inconsistent information on purchase and sales agreement.

Which of the following specifies a requirement of pre-loan counseling for consumers?

Homeowner and Equity Protection Act

Property flipping

Illegal when a home is bought, appraised for more than it's worth, and sold within a short time frame. Kickbacks to the parties are commonplace.

______ lending was a contributing factor to the housing collapse in the mid-2000s.

Predatory

Sylvia is sitting pretty. She managed to convince the appraiser to appraise the property she recently purchased for more than it was worth, and then she was able to sell the property very quickly. The profit she made from the sale, even after paying off the appraiser, was considerable. Not bad for a few hours' work. Which type of mortgage fraud scheme is this an example of?

Property flipping

Undisclosed buyer rebate

The seller or another party provides funds that aren't included in the settlement statement. In order to be legal, rebates must be disclosed to the lender and must appear on the settlement statement.

Which of the following acts created regulations for advertising credit services?

Truth in Lending Act

Equity skimming

An investor receives title to a property— often by using a straw buyer—doesn't make the mortgage payments, and usually rents out the home until foreclosure occurs

False identity

Borrowers may use a stolen or fictitious identity to obtain a home loan.