Back in late 2006 I was looking to purchase a small rental property. I initially agreed to purchase a 4-unit building but then backed out after an inspection revealed it to be in poor condition. I signed up with a mortgage broker and would have used her had I gone through with the purchase. We got so far as to look over and sign the good faith mortgage estimate. What I found there surprised me. The broker had pre-filled our answers, which was fine, as I had given her all the correct information. However, I found that our income had magically jumped from $35,000 for the prior year to $83,000. My wife and I were both in graduate school at the time so this was obviously not true. Also, although it was to be a rental building, the broker had checked the box saying that we would live there, contrary to what I had said multiple times.
If I had not read the document carefully I would have inadvertently committed felony mortgage fraud.
See the offending documents (personal info redacted).
The mortgage broker I worked with was Home Loan Experts (now defunct), which was a subsidiary of Golden West Financial, now part of Wachovia.
How many borrowers do you think would have the guts and good sense to make the mortgage broker fill in the correct information?
Not many, as it turns out. My big regret when it comes to this is that I didn’t connect the dots and decide to short housing and mortgage lenders back then (September 2006).