The amount of commercial mortgage fraud scams have increased tremendously within the past decade. It is estimated there has been at least a four-fold increase in the amount of individuals or companies who have become victims or perpetrators of commercial mortgage fraud. The amount of mortgage fraud being committed is often linked to organized crime groups.
Fraudulent Purchase Agreements
One of the most common scams in commercial property involves the use of fraudulent purchase agreements. The agreement can be a complete fake in order to increase the amount of money obtained as a loan.
In another scenario, the purchase agreement can be legitimate between a company and the individual requesting the mortgage for the commercial property. However, when an investigation is completed, it is later revealed the person who is buying the property owns the company that is selling the property.
The person will create a limited liability company, and sell the property at a much higher price than what they paid for it. They will then obtain a mortgage and “buy” the property. In these scenarios, the fraudsters will be able to get maximum profit from these scams.
Fraudulent Financial Statements
Another very common scam in commercial property fraud is using fraudulent financial statements. These financial statements can either be reproduced by the person requesting the loan or by a third-party that produces fraudulent documents. The fraudulent financial statements will be produced in such a way that the person is either trying to obtain loan approval, or they would like to profit from the mortgage loan.
Fraudulent Property Appraisals
Fraudulent property appraisals are another common scam for commercial loans. In this scam the perpetrator will have the property appraised to a higher than usual amount. Often the appraisal is done based on what companies might be moving into the commercial property, rather than what the true value is of the building without these renters. In this way the person is able to receive a mortgage loan of a higher value. In most cases, the companies that have been reported have rented or will be renting the building have not done so or will never do.
Withholding of Negative Property Information
This can be is one of the biggest areas of commercial mortgage fraud. This scam pertains to the buyer withholding information about the property on the loan application. This is because the information will have a negative impact on the loan decision, so it is not revealed. It is only after a true property inspection that this information is revealed.
Getting Help
If you are a victim of commercial mortgage fraud or have been accused, the previous information is only a guideline and it is recommended you seek the help of an attorney.
