The term Mortgage Fraud can encompass a wide range of conduct, from a wide range of actors. In a mortgage transaction, there can be a mortgage broker, a real estate broker, a title company, a home inspector, an appraiser and lawyers. Any of these actors can sometimes engage in fraudulent or negligent practices which can wreak financial havoc on a consumer or businessperson.
Under both New York state law and the federal Truth in Lending Act 15 U.S.C. §1635, a consumer has a 3 day right to rescind a refinance or home equity mortgage transaction; that is until midnight of the third business day after the transaction to cancel the mortgage. But first:
- The consumer has to sign the mortgage, coupled with a “Promissory Note”; and
- The consumer must be given a Truth in Lending disclosure document which outlines the substantive terms; see https://www.consumerfinance.gov/askcfpb/1983/what-is-a-closing-disclosure.html
- The consumer must be given 2 copies a Notice which outlines the right to cancel the mortgage;
But a diligent consumer will rescind only if he/she feels something did not “smell right” with the mortgage. Maybe after the closing, the person goes home, carefully reads the papers and does not recognize a term or condition that was supposed to exist but does not. Oftentimes a mortgage broker, lawyer or realtor says something that does not quite make it to the paperwork. Both state and federal law allows this 3-day right if the consumer has “cold feet.”
But many times a mortgagee identifies a discrepancy long after that 3 day right has expired. Maybe the appraisal was far too high; maybe the interest rate or term of the loan was not represented correctly; maybe an adverse condition of the property was hidden; maybe there are lien(s) attached to the property that were not properly taken care of. All in all, there are so many aspects of a mortgage transaction that can go awry. Sometimes litigation is the only answer to solve an issue on a consumer’s most valuable asset.
In the advent of the financial crisis of 2008 and continuing, it was found that banks and other financial institutions were, to say the least, “overreaching.” Appraisals were sky high to allow for falsely inflated loan amounts. This practice among others, fueled the housing market creating a “bubble” that burst with the fall of Lehman Brothers and AIG.
No income, No Job, No Asset (codename “N.I.N.J.A.”) loans used to be the flavor of the day. Mortgage brokers would boast: “if a consumer could breath, he/she could get a mortgage.” There was simply no income verification back then fueling the massive volume of loans and the bubble in home prices.
Those bank practices above are only a few examples of what went to the heart of “Mortgage Fraud” but they are not an exhaustive list.
Mortgage rescue scams were prevalent back then, but they still exist today. Mortgage investors prey on homeowners in a time of distress: when they could no longer pay the mortgage or were already in foreclosure proceedings. These took the flavor of offers that will stop or delay foreclosure payments for an upfront fee or make payments on your behalf. Insidious are even companies claiming to be a government entity, or those that work with attorneys but do not actually provide legal services.
If you feel you are a victim of mortgage fraud, do not hesitate to contact Kupillas & Unger at (212) 655-9536 for a free phone consultation. We handle mortgage fraud cases in the five New York Boroughs: Bronx, Manhattan, Brooklyn, Staten Island and Queens, and Long Island and some upstate New York counties.