Mortgage fraud became a hot topic after President Trump tried to fire Federal Reserve Governor Lisa Cook over claims of mortgage fraud — allegations she denies and for which she hasn't been charged.
Trump accuses Cook of claiming two properties as her private residence in loan applications to get a better financing rate. The U.S. Court of Appeals for the District of Columbia Circuit has blocked her firing, and the president has filed an appeal with the Supreme Court.
The attempted removal of Cook has reignited scrutiny of mortgage fraud, an umbrella term for any intentional illegal activity that involves deceit or misdirection during the mortgage financing process, according to the US Office of the Comptroller of the Currency. Cook is accused of owner-occupancy fraud, but mortgage fraud can take many forms, targeting lenders and consumers.
Mortgage fraud losses reach $6 million
Mortgage fraud reports and monetary losses are on the rise. As technology advances, this ups the risk.
According to data from the Federal Trade Commission Consumer Sentinel Network, a database law enforcement uses, monetary losses from mortgage fraud doubled year over year to $6 million in the second quarter of 2025. The number of reports grew 7.3%, from 302 to 325.
Data provider Cotality attributed the increase to volatile conditions in the real estate market, including higher mortgage rates, softening home price growth and rising insurance costs.
These are the primary forms of mortgage fraud that consumers commit:
- Owner-occupancy: Borrowers claim more than one property as their primary residence to obtain favorable loan terms, including a lower interest rate or down payment.
- Income: Consumers submit false income information to qualify for more substantial financing or better overall terms.
- Appraisal: A property owner purposely overinflates a home’s value for a higher sales price or more favorable financing. Appraisal fraud often involves collusion by industry professionals.
Sharon Reichhardt, executive vice president of operations for mortgage software company ACES Quality Management, said owner-occupancy fraud is the most common of the three. Since lenders don’t share occupancy status information via a database, there are few checks and balances in place to stop fraudsters from selling the same lie to multiple lenders, Reichhardt said.
These are the primary forms of mortgage fraud waged against consumers:
- Foreclosure rescue: Fraudulent lenders portray themselves as “foreclosure consultants” who assist delinquent homeowners. Their goal is to gain control of your home’s title and/or strip you of equity.
- Loan adjustment/modification: "Schemers take your money — often by making a false promise of saving you from foreclosure," according to the Consumer Financial Protection Bureau, which offers the following warning signs that you are working with someone unscrupulous:
- They ask you to pay fees up front to receive services
- They promise to get you a loan modification
- They ask you to sign over the title to your property
- They ask you to sign papers that you do not understand
- They say you should start making payments to someone other than your servicer or lender
- Deceptive lending: Lenders offer faster financing options with loan terms that place the borrower in a cycle of debt.
- Identity-based: Someone steals your identity and other financial details to take out a loan.
Identity theft and mortgage fraud may intersect. Fraudsters will obtain a target’s personal data electronically — like a Social Security number, bank account details, credit or debit card information, etc. — and then use it to take out a mortgage.
Here's how consumers can protect themselves
As a consumer, protecting yourself against mortgage fraud comes down to vigilance and filing reports with the right authorities.
Be vigilant
There are fraud detection services consumers can pay for, but consumers can also monitor their financial accounts and property records. What to watch out for:
- Credit report changes
- Unrecognized bank account transactions
- Denied loan applications
- IRS issues
- Debt collection notices
- Property deeds filed in your name without your knowledge
Gather evidence and file a report
Gathering evidence and establishing a paper trail are key. According to debt relief attorney Leslie Tayne, founder of Tayne Law Group in Melville, New York, consumers must “prove their innocence to the lender and other authorities to absolve themselves from debt accumulated by the fraudster.”
To start a paper trail, Tayne urges victims to file a Federal Trade Commission identity theft report at identitytheft.gov or a suspicious activity report with the Financial Crimes Enforcement Network at reportfraud.ftc.gov. Those reports will help you file a police report later on and serve as proof of fraud in a court of law.
If you are the victim of a loan modification scheme, you can report that company to the Consumer Financial Protection Bureau online at consumerfinance.gov/complaint or by calling 855-411-2372.
She also recommends keeping the following records:
- Credit reports
- County property records, like deeds and liens
- Mortgage statements
- Escrow notices
- Tax documents (1098, mortgage interest statement)
Alerting your financial institutions is the next step. They typically require a police report to halt collections. “This process may require some back-and-forth, so it’s important that the victim remains steadfast in their pursuit and comes prepared with the necessary documents,” Tayne shared. “Being organized when alerting relevant financial institutions of fraud will likely increase the likelihood that the fraud will be resolved, and hopefully, as soon as possible.” Lastly, if you need legal help, the National Crime Victim Bar Association helps fraud victims with attorney referrals, Tayne explained. You can also employ pro bono student lawyers if you can’t afford traditional counseling.
These are the legal consequences of mortgage fraud
Solomon L. Wisenberg, a white-collar criminal defense lawyer and former chief of the Western District of Texas, said the sentencing guidelines for mortgage fraud — established in 1987 — are mostly advisory.
The statutory maximum for mortgage fraud can include fines up to $1 million and prison sentences up to 30 years. The minimum sentence is six months. Other factors include the defendant's criminal record and how complex the fraud was.
Lenders fight back
Despite the recent uptick in mortgage fraud, lenders are getting better at detecting it. Mortgage lenders regularly conduct data mining. Pre-funding application audits are also becoming more prevalent.
“Fannie Mae is leading the charge to do more prefunding audits and really get to those loans before the close,” explained Reichhardt, of ACES Quality Management.
“I think we've really increased the barriers to buy a house, but I think if people are resorting to fraud or misrepresentation, we need to look at why,” she added. “Fraud is never going to go away, but I am concerned about those people that feel like that's the only choice they have."