LOAN AND

MORTGAGE FRAUD
What is Loan?

A thing that is borrowed, especially a sum of

money that is expected to be paid back with
interest.
What is Loan Fraud?

When someone uses your identity to illegally

obtain a loan. This can be during the time of
filling in the application or when receiving the
loan. sometimes the loan fraud could apply
for much larger items such as a car, business
loan or a house.
Different types of Loan Fraud:
• bogus loan
• loan sharks
• Mortgage Fraud
Bogus loans
• Bogus loan companies and fake credit brokers often
target those with poor credit ratings. People who
apply for the loan are told to pay an upfront fee.
Loan sharks
• Person who lends money to people at extremely high
interest rates and often uses threats of violence to
collect debts.
PHILIPPINE LAW AGAINST LOAN FRAUD

· Republic Act No. 9474 “The Lending Company

Regulation Act of 2007”
· Republic Act No. 8556 “The Financing Company Act of
1998”
· 18th Congress – Senate Resolution No. 121
· Republic Act No. 3765, “Truth in Lending Act”
What is Mortgage?
• A legal agreement by which a bank or other creditor lends money at
interest in exchange for taking title of the debtor's property, with the
condition that the conveyance of title becomes void upon the payment of
the debt.
• A mortgage, also referred to as a mortgage loan, is an agreement between
you (the borrower) and a mortgage lender to buy or refinance a home
without having all the cash upfront. This agreement gives lenders the legal
rights to repossess a property if you fail to meet the terms of your
mortgage, most commonly by not repaying the money you’ve borrowed
plus interest.
What is Mortgage Fraud?
• According to the Federal Bureau of Investigation (FBI), it is any
sort of "material misstatement, misrepresentation, or omission
relating to the property or potential mortgage relied on by an
underwriter or lender to fund, purchase, or insure a loan.“ With
this working definition, we see that mortgage fraud can be
committed by both individual borrowers and industry
professionals. And the sums involved are high. 
Two distinct areas of Mortgage
Fraud for Profit
• Those who commit this type of mortgage fraud are often industry
insiders using their specialized knowledge or authority to commit
or facilitate the fraud. Current investigations and widespread
reporting indicate a high percentage of mortgage fraud involves
collusion by industry insiders, such as bank officers, appraisers,
mortgage brokers, attorneys, loan originators, and other
professionals engaged in the industry. Fraud for profit aims not to
secure housing, but rather to misuse the mortgage lending process
to steal cash and equity from lenders or homeowners.
Fraud for Housing
 This type of fraud is typically represented by illegal actions taken by
a borrower motivated to acquire or maintain ownership of a house.
The borrower may, for example, misrepresent income and asset
information on a loan application or entice an appraiser to
manipulate a property’s appraised value.
Types of Mortgage Fraud
• Property Flipping
• Asset Rental
• Equity Skimming
• Foreclosure Scams
• False Identity Usage
• Inflated Appraisals
Property Flipping
• Purchasing, renovating and reselling property is not inherently illegal. If it
was, the rise of property flipping shows would surely have been more
controversial. However, there are situations where flipping houses
becomes fraudulent. This type of mortgage fraud occurs when a property
is purchased below the market price and immediately sold for profit,
typically with the help of a corrupt appraiser who inflates the value of the
property.
Asset Rental
• Asset rental fraud occurs when loan applicants borrow, or rent,
the assets of others to make themselves appear more qualified
for mortgage financing. After the mortgage closes, the money is
typically paid back to whomever it was borrowed from.
Equity Skimming
• With equity skimming, investors may use straw buyers – or someone
who purchases property on behalf of another person. Using false
income documents and credit reports, the investors obtain a
mortgage loan in the straw buyer’s name. After closing, the straw
buyer passes the property to the investor in a quit claim deed, which
gives up all rights to the property and gives no guarantee to title.
• Once in their name, the investor does not make any mortgage
payments and instead rents the property until the event of a
foreclosure, typically several months later, therefore profiting from
the rental income.   
Foreclosure Scams
• Unfortunately, scammers can also try to take advantage of homeowners on the
verge of foreclosure. In this type of mortgage fraud, homeowners who are at
risk of defaulting on their loans or whose homes are in foreclosure are misled
into believing they can save their homes by putting the property in the name of
a third-party investor. The perpetrators make a profit by then selling the
property using a fraudulent appraisal, therefore stealing the seller proceeds.

• In this scheme, homeowners may be led to believe they can rent the property
for a minimum of a year and repurchase the home once their credit has
improved. However, the perpetrators do not make the mortgage payments and
the property usually ends up in foreclosure.
False Identity Usage
• Scammers often use false or stolen identities, to commit
mortgage fraud. This takes place when the scammer
obtains financing by using an unknowing victim’s financial
information, including Social Security numbers, stolen pay
stubs and falsified employment verification forms, therefore
obtaining a fraudulent mortgage on a property they do not
own or occupy.  
Inflated Appraisals
• False appraisals are another common way scammers commit
mortgage fraud. Appraisal fraud may be committed by the
appraiser alone, or with the help of other professionals, including
the builder and mortgage banker.
• In some cases, a corrupt appraiser may undervalue a property to
ensure an investor will be able to purchase it, but more often we
see appraisers inflating the value of a property to increase the
purchase price and, in a chain reaction, also maximize their
commission.
THANK YOU!!!!!