“That’s Foreign to Me”
People who get caught committing mortgage fraud may have their loan called immediately. Then they would have to refinance or sell their house.
What constitutes mortgage fraud, you ask? The following are a few examples.
1. Occupancy fraud – purchasing an investment or vacation property, but claiming it is your personal residence.
2. Hiding debt – not reporting owner financing arrangements or personal debts.
3. Hiding your down payment source – reporting that a loan is a gift, sale, or income.
Cross your t’s and dot your i’s and make sure you hire an experienced Qualified Intermediary and Tax Professional.
A fourth type of mortgage fraud I am seeing, especially in Florida, is tax return fraud. Taxpayers prepare a return without expenses and send into the IRS and give to the mortgage company. Then later they amend the return including the missing expenses. Mortgage brokers have been complicit in encouraging this type of fraud.
We will not prepare returns that blatantly omit deductions to secure a mortgage.
However, we will set up expenses as capital items (when possible) so that they can be immediately expensed using 100% bonus depreciation. This gives the client a tax deduction that the underwriter will add back (depreciation addback) to income.
This is a legal Win/Win for our clients.
Mortgage lenders now have a new form 4506-C to confirm borrower’s income with IRS.