The most common types of securitization fraud schemes associated with mortgage loans include:
- Misrepresentation of Loan Quality: This involves lenders providing false information about borrowers' income, assets, or creditworthiness to inflate the quality of loans packaged into mortgage-backed securities (MBS).
- Robo-Signing: In this scheme, mortgage servicers or foreclosure agents sign foreclosure documents without properly reviewing them, leading to fraudulent foreclosure proceedings.
- Predatory Lending: Some lenders engage in predatory lending practices by offering loans with deceptive terms, such as high-interest rates, hidden fees, or adjustable rates that lead to payment shock for borrowers.
- Dual Tracking: Mortgage servicers may engage in dual tracking by simultaneously processing a borrower's application for loan modification while proceeding with foreclosure, often resulting in confusion and wrongful foreclosures.
- Forgery of Documents: Fraudsters may forge signatures or alter documents related to mortgage loans, including promissory notes, deeds of trust, or assignments, to deceive investors or homeowners.
These schemes undermine the integrity of the securitization process and can have devastating
