by Lucas Spaeth
Mortgage Fraud in Minnesota
Inattentive or Fraudulent Minnesota Mortgage Agents
Mortgages are only offered to buyers who have sufficient assets and income to validate the risk of the loan. Agents licensed to originate mortgages are responsible for accurately reporting a potential buyer’s income and assets, to minimize the lenders’ risk. Mortgage agents have a lot to gain from selling as many mortgages as possible, and they are often not concerned about whether the buyer can afford the monthly payments.
Once the mortgage is sold, the lender accepts liability for the loan, so a mortgage agent has great incentive to fraudulently report income and assets, in order to originate as many mortgages as possible. This occurred so often in 2000 – ’07, that it led to the collapse of the housing market. Now, mortgage lenders are much more careful to guard against this type of fraud, but it still happens on a regular basis.
The best way for home buyers to guard against it is to make sure they can afford the house that they buy, ensuring that the monthly payments are within their budgets. Buyers should not always use the full amount of loan money for which they qualify. If a buyer discovers that his or her mortgage was fraudulently recorded, a court can invalidate the mortgage and award damages caused by the fraud.
Sometimes a homebuyer finds that he or she has been misled into purchasing a home with serious undisclosed problems. Defects like mold, siding problems, moisture intrusion, leaky roof, foundation and settling problems, or prior releases of legal claims, rights and remedies, often carry a duty of disclosure. If you find a problem in your home that was not disclosed to you before purchase, you may have a claim against the previous owner. You may be able to claim damages for the cost of repair, the diminished value of the home, or the rescision of the purchage agreement.
The best way to protect against this type of fraud is to insist on a home inspection. All homebuyers should hire a third party to inspect the home and prepare a report on the condition of the structure, roof, plumbing and heating and electrical systems. In Minnesota, this usually costs between $200 – $500, depending on the selling price of the home. In Minneapolis and St. Paul, the Truth-in-Sale of Housing ordinances require an evaluation of a home before it can be shown to prospective buyers. The evaluation is done by a city-licensed evaluator and may require the seller to make certian repairs before the home can be sold. The buyer should not consider this a replacement for a private inspection, because it does not always uncover all defects.
If you buy a new home and later discover a defect in the construction, you can likely recover against the contractor or subcontractors for breach of contract or implied warranty.