Protecting Your California Home From Mortgage Fraud
(With Tips!)

Mortgage fraud continues to rise across California, targeting unsuspecting homeowners and investors. The California Department of Real Estate (DRE) recently issued a consumer alert emphasizing that California's high property values and active real estate market make it especially vulnerable to these crimes.

In this blog, we'll break down the most common types of mortgage fraud and share practical tips to keep yourself safe.

What is Mortgage Fraud?

Mortgage fraud happens when someone deliberately provides false information to get approved for a home loan or to get better loan terms. This involves falsifying information or omitting key details to secure loan approval or better terms.

Mortgage fraud can be committed by various parties during the lending process including:

1. Borrowers who lie about their income, savings, or plans to live in the property.
2. Lenders and banks that don't carefully verify applicant information before approving loans.
3. Industry professionals like mortgage brokers and appraisers who change information to make money.
4. Scammers who create elaborate schemes to cheat lenders and borrowers.

Types of Mortgage Fraud

Understanding the most common types of mortgage fraud can help you recognize warning signs and protect your investment. Below are are six types of mortgage crimes that commonly target California homeowners:

#1: Foreclosure & Equity Scams

Foreclosure scams target homeowners facing financial hardship by offering fake "rescue" services that promise to save their home from foreclosure.

These types of scammers may ask homeowners to sign over their deed, pay upfront fees for loan modifications that never happen, or lease back their own home at inflated prices.

These scams often result in homeowners losing their property and any remaining equity while the scammer profits from the sale or rental income.

#2: Property Value Fraud

Property value fraud occurs when appraisers, real estate agents, or other parties intentionally inflate or deflate a property's appraised value for financial gain.

Inflated appraisals allow borrowers to secure larger loans than the property is worth, while deflated appraisals help buyers purchase properties below market value or enable tax fraud.

This type of fraud destabilizes the housing market and puts lenders at significant financial risk.

#3: Straw Buyer Schemes

A straw buyer scheme involves using another person's name and credit to purchase a property, often to hide the true buyer's identity or to qualify for a loan they couldn't get on their own.

The "straw buyer" typically has good credit but no intention of living in or paying for the property, while the actual buyer profits from the transaction.

Both parties can face criminal charges, even if the straw buyer claims they didn't understand what they were doing.

#4: Deed and Title Fraud

Deed and title fraud happens when criminals forge property documents or steal someone's identity to transfer ownership of a property without the real owner's knowledge.

Scammers may then take out loans against the property, sell it to unsuspecting buyers, or rent it out and collect payments.

Homeowners often don't discover the fraud until they receive foreclosure notices or find squatters in their property.

#5: Property Flipping Fraud

Property flipping fraud involves purchasing a property and quickly reselling it at an artificially inflated price based on a fraudulent appraisal.

Unlike legit house flipping, no real improvements are made to justify the increased value, and the scheme typically involves the deceiving a buyer of the properties true value.

This leaves the new buyer with a property worth far less than they paid and a loan they can't afford.

#6: Equity Skimming

Equity skimming is when an investor uses a straw buyer to obtain a property, collects rent from tenants, but never actually makes the mortgage payments.

The scammer ends up pocketing all the rental income, while the property goes into foreclosure. this leaves the straw buyer with ruined credit and potential legal consequences.

Tenants may also be victims of equity skimming when they are evicted without warning after paying rent to the fraudulent landlord. 

#7: Business Email Compromise (BEC)

Business Email Compromise fraud has become more common today. These scammers will hack into email accounts of agents, escrow officers, or title companies and send fraudulent wire transfer instructions that appear legitimate, tricking homebuyers into sending their down payment to fake accounts.

With California's high-value property transactions and digital-heavy real estate market, these scams can result in devastating financial losses that are nearly impossible to recover.

Tips for Avoiding Mortgage Fraud

Protecting yourself from mortgage fraud requires vigilance and careful attention throughout the home-buying process. Here are key steps to safeguard your investment:

• Verify wire transfer instructions by phone – Always call using a known number before sending money.
• Review all documents carefully – Question anything unclear or suspicious before signing.
• Never sign blank forms – Ensure all paperwork is complete and accurate.
• Work with licensed professionals – Verify credentials through the California Department of Real Estate.
• Be wary of deals that seem too good to be true – If it sounds unrealistic, it probably is.
• Report suspicious activity immediately – Contact the DRE or local law enforcement if something feels wrong.

Protect Your Investment With Expert Property Managers

Mortgage fraud schemes can have devastating consequences for property owners and investors, but awareness and vigilance are your best defense.

Protecting your California property requires vigilance and expertise. At Pasas Property Management, we bring 25+ years of expertise in protecting and managing investment properties with integrity and care. From verifying legitimate ownership to conducting thorough background checks on tenants, we take every precaution to ensure your property remains secure and profitable.

Call us today at (619) 607-7560 to discuss how our San Diego property managers can help protect and grow your real estate portfolio.