Elements of Fraud and the Mortgage Foreclosure Process

Avoiding Foreclosure by Exposing the Fraud in the Mortgage

As a result of government intervention in the housing market, fraud has become rampant in the mortgage lending industry, and homeowners may be able to raise this issue when defending against a foreclosure lawsuit. Fraud is defined as an intentional deception which results in injury to a person. There are a number of elements of a fraud case in order to consider it fraud. These include the following:

The statement must be a false and material misrepresentation. The person making the fraudulent statement must know it is false or be ignorant of its truth. The person making the statement must intend for the person to whom it is made to rely upon the that statement and in a manner reasonably contemplated. The person to whom the statement is made must be ignorant that the statement is, in fact, false. The person to whom the statement is made must have a right to rely on that statment or be reasonably justified in doing so. The person to whom the statement is made must suffer injury.

Fraud can occur in many ways during a mortgage transaction, and may often occur in several steps of a corrupted process. Any party to the transaction, from the real estate agent to the title company to the mortgage servicer, may be engaged in fraudulent activity. Any misrepresentation, concealment, nondisclosure of material fact, or misleading conduct may be considered fraudulent, depending on the circumstances of the case.

If a lender or mortgage broker has used some ingenious method to take advantage of homeowners, mislead them, or trick them, then fraud may be involved. There are even a number of different types of fraud. For instance, contructive (legal) fraud does not have to have an evil intent to cheat a borrower. Fraud in fact (positive fraud) is fraud that does have an evil intent and is specifically used to take advantage of someone.

Homeowners who think they have been defrauded by a party to their mortgage transaction may attempt to bring that party into the lawsuit, even if it is not the company suing them or proceeding with the foreclosure in the first place. It will be important, however, to prove that all the elements of fraud have been met in the case. For this reason, consulting an attorney may be advisable for borrowers wishing to make this defense to foreclosure.

One of the most well-known types of fraud in relation to mortgages is that of mortgage servicing fraud, where a servicer uses fraudulent tactics to push homeowners into foreclosure. This may be done through a number of ways, many of which are detailed in our mortgage servicing abuse articles. But too many homeowners have suspected their servicer of fraud for it to be all that uncommon. In fact, most of the biggest servicers have been sued for fraud and been found guilty or have settled out of court for hundreds of millions of dollars.

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