DSCR loan growth is opening the door to mortgage fraud, broker warns
“I don’t think people actually realize that it is truly mortgage fraud, which is very illegal,” Bloom said. “They’re like, ‘Oh, we’ll just kind of lie on this, and it’s no big deal.’ But it is. It’s a federal crime at the end of the day.”
While she noted in the comments of the post that she didn’t believe the realtor or client was being malicious, she said there is a lot of misinformation which can contribute to situations like this one. Another issue is the rate difference between the loan types, which is why the temptation exists.
For a borrower who cannot qualify through any documented income path, the choice comes down to a no-doc primary loan with a rate closer to 9%, or misrepresenting the property as an investment at a DSCR rate closer to 6%.
“You’re not talking half a point,” she said. “You’re talking, at a minimum, 1.5% to 2%.”
How servicers are catching it
Bloom said the fraud is not going undetected, and her Facebook post produced two specific examples of servicers catching occupancy fraud after closing.
