Definition: Fraud is a deliberate deception practiced in order to gain unfair or unlawful gain. [source: The American Heritage Dictionary of the English Language, 4th ed.]
To legally constitute a crime, two conditions must occur: A deliberate misrepresentation of facts about a product or service. Actual monetary damages must result.
Fraud can be difficult to prove in a court of law. Although laws may vary somewhat from state to state, generally certain conditions must be met:
- Deliberate misrepresentation of the facts. The accuser must be able to prove prior knowledge and voluntary misrepresentation of the facts.
- Justifiable or actual reliance on the expertise of the person accused. The obligation to investigate. It is the responsibility of investors or customers to fully investigate a proposal before any money changes hands. Once a party enters into a legally binding contract, buyer's remorse over the terms of the deal is not the same as fraud.
Fraud includes failure to point out a known mistake in a contract or other document, or not revealing a fact which he/she has a duty to communicate.
Insider/Third Party Collusion: Pieces to the Fraud Puzzle- The FBI is focusing its efforts on those crimes perpetrated by industry insiders who are part of organized enterprises engaged in mortgage fraud for profit
EXAMPLE: The appraisers report indicates that the appraised value of the property provided is on a 20-acre piece of real estate. However, the title documents show the piece of real estate to consist of only 2 acres.
Since fraud is intended to employ dishonesty, to deprive another of money, property or a right, it is a crime: for which the fraudulent person can be charged, tried, convicted and punished.
Statute of Frauds-- The law in every state which requires that certain documents be in writing, such as real property titles and transfers (conveyances), leases for more than a year, will and some types of contracts. The original statute was enacted in England in 1677 to prevent fraudulent title claims. [Source: Law.com Dictionary (The Peoples Law Dictionary]
Mortgage fraud is an intentional misrepresentation of facts provided in the purchase of real estate and in the qualification for, and granting of a mortgage loan. Mortgage fraud can be perpetrated by the purchaser or against the purchaser. Fraud can be perpetrated by virtually anyone involved in the transaction against the borrower, seller, real estate company, or mortgage company.
In conjunction with the launch of our recently updated Mortgage Fraud class online we will continue to discuss mortgage fraud in greater detail. Next week we will discuss recognition of Mortgage Fraud and later best practices for prevention. Please join us each week as we cover the basics in each of these areas. And don't forget that our updated Mortgage Fraud course online is discounted through the month of May.
Click Here for more information on the updated Mortgage Fraud class online, available for 6 hours of MRE, Master of Real Estate Credit.
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