Overstated Income! Was This Fraud?

[Buddy Wizer]

Heres one scenario for the fine people on this board...opinions and comments are welcome... I will just skip all the boring details and get to the meat of the issue.....

Lets say a mortgage broker sends to borrowers the residential loan app a couple or so weeks before closing.... Loan application was signed and intialed in those areas highlighted by the broker... loan application is returned to broker overnight.... note that the date which was placed on this application as it was signed by the borrowers was 1/1/07... also, keep in mind that these are salaried people and previous 2 years of tax returns, 6 months of paystubs, all banking info, 401k info and credit reports have all been provided to broker. Also, borrowers' HR dept is contacted for Verification of Employment to verify info provided.

OK, so fast forward to closing on, lets say, 1/15/07...loan application, for whatever reason, seems to have been part of 100's of papers flying around closing table(discovered after the fact - more later on this).. which was signed (again) by borrowers.... this time using, of course, using current date of 1/15/07 next to signature.

closing is completed and borrowers are excited and move into their new home.

Well, 6 months or so later borrowers are realizing that mortgage payment, tax and insurance costs are somewhat tough to meet and finds it necessary to dip into savings to cover their monthly expenses. Borrowers are a bit confused as no new debt (outside of mortgage) has been assumed, but yet there is a short-fall of income to meet monthly expenses.

Fast forward again to 7 months later (13 months after closing date)... borrowers are very concerned and contacts lender as savings are just about gone leaving no more backup $ to assist with monthly expenses. Lender says that since they are not behind there is currently not much they can do to assist.

2 months later (15 months after closing) borrowers miss first mortgage payment as there would be no $$ left over if mortgage payment was made....borrower is now officially broke and decides they cannot afford the home....

Borrowers begin their own inspection of their closing documents and discover the residential loan application was part of the closing documents as a copy was provided in the closing doc packet. They review the application and discover that the income stated on the loan far exceded what their actual monthly salary was, to the tune of approx $5,000 more per month more Borrowers are shocked at this and wonder how or why the broker would have done this and how the loan was ever approved seeing all income, banking, savings, 401k and tax returns were provided to the broker. Loan application also shows date of 1/15/07 so borrowers assumes this application was part of the docs signed at closing.

But wait, wasn't there was a first application provided to broker as part of the packet that was sent to them which was signed and dated back on 1/1/07?? Where is this application dated 1/1/07??

OK... so borrowers realize that maybe there was some fraud committed by their mortgage broker and begin the research for an attorney that can review their mortgage documents and advise them of what their recourse is.

I will leave of the details at this point, but what does anyone think about this situation? It would be interesting to hear opinions on this......


buddy

[Mary Salzer]

Hi and welcome to the forum and thank you for joining.....

That first 1003/Application signed was the initial application and part of the final package from the Broker to underwriting and disclosure point of view or should have been. It was delivered with the final 1003/Application at the time of underwriting for continuity sake so that the underwriter could compare the original 1003/Application to the final......for the accuracy and data integrity of the file.

Now, that often was not the case, the initial application had a "make over" and was submitted as unsigned - telephone interview so that the gory REAL details of the borrower's data could be swept under the rug and compel the underwriter to approve the loan....

How do I know...I am an underwriter and caught this numerous times to the dismay of my employers who wanted every loan approved. I was not their favorite underwriter...obviously...I caught on to the malfeasance....not appreciated. Did this happen on a regular basis, you betcha....every day.

So what do you think happened to that original, initial 1003 signed 1/1/07...care to venture any guesses.....pretty obvious...

Have you executed a QWR on the file that resides at the lender yet? You need to and you should do it this way. QWR -- there are examples of the letter in the Tool Box. In that letter demand your Life of Loan History, copy of Note, Deed of Trust, Riders, all Assignments of the Deed of Trust, TIL, Right of Rescission (if refi), Lender Final HUD-1, copy of initial loan application and final lender loan application, all disclosures and all loan documents in your file, copy of appraisal. Send this three times certified return receipt required and also send it to the Broker, Title Company and all others in the Chain of the Transaction.

This thread has a really good example:

My Countrywide escapade and Hi!

[JacMac]

Hi Buddy and welcome again.

I'm separating this post into it's thread under the title: Overstate income! Was this fraud? otherwise it makes it impossible to follows people's story if their posted in the middle of another thread.

One question I have for you it you spoke very generally and I understand there may be a question of anonimity, but if there was a point that the couple found it hard to make their payments they must have realized that their loan was an ARM and the payments had gone up, correct?

I'm assuming that's not what they asked for or thought they were getting or is it that they just didn't understand how an ARM works?

[Buddy Wizer]

Poppy,

Also, you bring up a good point as the application the borrowers have is marked as being a telephone interview.... thats obviously a mis-representation as all income verification was done through hard copied... pay stubs, tax returns, VOE, banking info, etc etc....... so how could the borrower 'state' anything other than that income that was verified??

Again, first time this application was submitted was turned down. Then somehow it was submitted a 2nd time and approved? How does that work?