Mortgage Frauds in Kenya
There can be malpractices in the process of obtaining the mortgage that are referred to as mortgage frauds.
Dominic Mwangi
A mortgage is a financial assistance from a money lending institution or bank that assists one to acquire a property and then pay the money later to the lender. The most common types of mortgages are the fixed rate mortgages and the adjustable rates or variable mortgage. Such malpractices can see a legal consequence to anyone who happens to practice them and should therefore be avoided. Some of these malpractices includes;
Occupancy fraud
This happens when the borrower of the loan wants to obtains a mortgage for financing an investment property but on the application states that the property would be used for primary residence or as a second home. This sees the borrower obtain a loan with a lower interest rate than they deserved since the lenders offer low interest mortgages for residential property compared to investment property. At the long last, such misleading information will see on capital and a loss for the lender. A loss of revenue for the government also since taxes on gain or profits from the property will not be paid.
Employment fraud
This type of fraud happens when the mortgage borrower claims an employment position which they do not occupy, for example self-employment in a company that does not exist, or a senior manager in a real company. This is purposely done to offer a justification for a wrong figure as the borrower’s income for the purpose of a larger mortgage.
Impersonation fraud
This takes place when the borrower of the loan, assumes another individual’s identity to obtain a loan without the consent of the latter. In such a fraud the money lending institution suffers a loss since mostly the mortgage is never financed. The lender only realizes why they try to reach out to the borrower only to realize that the case was an impersonation. The lender may also suffer a loss trying to justify that the victim received the mortgage but in vain.
Appraisal frauds
This fraud happens when the value of a home is intentionally understated or overstated. Since in both the borrower is the beneficiary, they may involve a dishonest appraiser to produce wrong appraisal information or use a correct appraisal report that is altered with the graphic editing programs.
Income fraud
This is a fraud that happens when a borrower exaggerates their income. To qualify for the mortgage a for a larger loan. This is common where the lender does not need verification for the stated income that is necessary for one to qualify for a mortgage. In such frauds there is a lot of document forgery for documents of tax of return, bank account records among others which act as proves for the inflated income.
Liabilities-conceal frauds
Borrowers may not disclose liabilities such as other mortgages, credit card debts, among others which happens so as to reduce the monthly debt that has to be declared on the mortgage application. This further raises the credit worth of the borrower thus a larger amount of a mortgage. Liability conceal is considered a fraud since it allows a borrower a loan which otherwise would not have qualified.
Mortgage frauds are facilitated by an individual or a group of people such as real estate agents, loan officers who are involved in facilitating the mortgage, an appraiser among other individual. This is done with a promise of a reward at the end of the transaction. Since most mortgage frauds involve misrepresentation of information and forgery of documents, the facilitators can be faced with charges since its breakage of laws.
