Mortgage fraud

Federal and state authorities are investigating allegations of an elaborate mortgage fraud involving about 100 people living in or near this small factory town who say they unwittingly took out loans to buy houses at inflated prices in Indiana.

The borrowers, who include truck drivers, factory workers, a pastor and a hair stylist, say they were duped by acquaintances into signing stacks of documents and didn't know they were applying for loans. Instead, they thought they were joining a risk-free "investment group."

Now, many of the loans are in default, the borrowers' credit ratings are in ruins, and lenders are pursuing the organizers of the purported investment group in court. Companies stuck with the defaulting loans include Countrywide Financial Corp., the nation's largest home lender, and Argent Mortgage Co., another big lender.

Mortgage fraud, involving loans obtained by providing false information, has mushroomed in recent years as lenders have pushed for speedier loan approvals in an effort to remain competitive and milk maximum profits from the now-fading housing boom. The Federal Bureau of Investigation reported that mortgage fraud led to losses of $1 billion in 2005, up from $429 million a year earlier. Some of the fraud that slipped through during the boom is only now starting to surface.

Refinancing tips

When mortgage lenders evaluate your application for a loan, they look at a number of different factors to determine the risk you pose for lending. Most of these factors are within your control; lowering your risk improves your ability to qualify for a competitive mortgage loan. Here are tips to help you qualify for the best mortgage.

Your ability to repay and history of debt repayment are the primary factors mortgage lenders consider when evaluation your mortgage application. The mortgage lender determines your ability to repay by verify your employment status and household income. Your willingness to repay your debts is determined by your credit history.

A large portion of your credit score is based on your history of on time debt repayment. If you make a habit of paying your bills late, your credit score will suffer and mortgage lenders will charge you a much higher interest rate if they approve your application at all.

Before applying for a new mortgage you need to review your credit. You should request copies of your credit records from the three major credit agencies and carefully review all of your records for errors. Credit records are prone to errors and having mistakes on your credit will lower your credit score and raise the interest rate you will qualify for. If you find mistakes in your credit records you will need to dispute them. Once you have ensured your credit records are accurate concentrate on making all of your monthly payments on time; making payments on time will improve your credit score.You can also improve your credit score by maintaining low balances on your credit cards and avoiding major purchase until after securing your new mortgage.