When the going gets tough, the tough get innovative. In the beginning of the decade mortgage borrowers trying to trick lenders reported less debts and higher incomes to qualify for loans that they otherwise wouldn’t get. Now it seems as if borrowers have found a new way to get lower payments from lenders on loan modifications by doing just the reverse.
More and more borrowers have been reporting less income and more debts to seem less affluent than they are. Some firms claim that as many as one out of every five mortgages contains material inaccuracies.
Firms that review statements for erroneous information claim that there are many made up W-2 statements. Borrowers will provide a fake phone number for their place of employment, and when lenders call the number to verify employment and pay, the borrowers will lie about how much they make. Lenders now prefer to look up the numbers themselves and they are not going to take this sitting down, of course. Looking at bank statements and recent tax filings are two ways to catch these people in the act.
Borrowers may lie about the amount of credit card debt they owe as well. Even as lenders pull credit reports to verify the debt, people are deliberately running up their credit card balances before halting payment on mortgages that they can in fact afford. A third type of fraud happens when borrowers say they live in a property they actually rent out.
To add to the mess, loan modification and foreclosure-rescue specialists coach borrowers to lie or falsify the borrower’s information without their consent. Despite the fact that there are many legitimate specialists, many play the system as a way to rationalize charging for a service that is available for free. Authorities are currently aiming at loan-modification specialists who directly defraud consumers.
Mallory Megan works for a debt collection agency. Also she composes articles on business, finance, consumer spending and collection agencies.
