Purchasing a home is always a memorable experience in a person’s life with a checklist of things to do before receiving the keys to your permanent residence. With the assistance of an experienced agent the process is supposed to go smoother and cause less stress in your life.
Closing fraud is rare and occurs in less than half of 1% of all real estate transactions. However earlier this year, 11 people pleaded guilty in a federal court in northern Virginia to a scam that fleeced banks out of millions of dollars.
Closing fraud occurs when an agent systematically alters the terms of real estate closings so lenders send more money than is needed. The closing sheet that is sighed by the buyer and the one sent to the lender by the agent are different and the agent pockets the difference. It is estimated that 15% of the $4 billion lost by lenders to mortgage fraud last year — roughly $600 million — occurred at the closing table.
Large sums of money have also been lost when a closing agent fails to pay off a seller’s lien and takes off with the money. Generally in the case of closing fraud, it’s the lender that’s on the hook as long as you buy owner’s title insurance at settlement or at least what’s called a “closing protection letter”. Even if you decide to purchase your own policy, you’ll get some supporting benefits from the lender’s policy.
Your real headache would come when you go to sell your property or perhaps refinance and find out that there is an existing mortgage or two that have never been paid off. This could hold up a sale long enough to where the buyer begins looking at other properties elsewhere.
Here are a few basic steps that can be taken to protect you against these kinds of back end fraud from occurring:
• Secure your loan papers early and make sure the numbers match up with the documents given at closing.
• When interviewing closing agents, ask things like how long they’ve been in business, are they insured or if there have been any claims against them.
• Schedule the closing to be a few days in advance of your move, if something feels awkward walk away. You have every right to stop the show at any time.
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