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In an effort to get the loan or mortgage, many people falsify mortgage or loan applications and this is a crime against state laws as well as federal laws. If the fraud is found out, the applicant is prosecuted. It is estimated that nearly 10 percent to 15 percent applications for mortgages and loans involve fraud.
Because of mortgage fraud honest borrowers are penalized. Owners of mortgage debt lose their money on fraudulent loans that go bad and this loss is ultimately passed on to honest borrowers. The biggest loser is not the lender or the investor who buys the fraudulent debt. It is the consumer as every lender factors in something to take care of his losses, which can be through anything from credit risk to fraud.
It is the job of the bank underwriter to go through the loan application carefully along with all the supporting documents that the applicant has furnished. It is also the underwriter’s task to protect the interests of his or her employer so if he detects a tax fraud, he is bound to report the same to the authorities.
Usually before reporting to the authorities, the underwriter will conduct his or her own investigation based on the documents provided by the applicant. If there are inconsistencies, the underwriter can contact the applicant for clarification or additional supporting documents. However, if the documents do not satisfy the underwriter, he or she has the right to reject the application. And if the bank underwriter sees some form tax fraud, he or she will report it to the bank authorities who will decide whether to report the fraud to the police.
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