Ken Paxton

Mortgage Fraud

Mortgage fraud is a criminal offense and primarily involves fraud against mortgage lenders. Generally speaking, it occurs when facts are misrepresented: the value of a house is inflated, or the lender is misled about the buyer's income, credit history or financial situation.

The fraud can involve the mortgage broker, real estate agent, appraiser and/or the buyer. The result is that too much money is loaned, and the house is not worth what the buyer -- and ultimately the lender -- paid for it.

Mortgage fraud bilks financial institutions, but it can also be devastating for borrowers and their families. It is having a broad negative effect on our economy, property values, and financial markets. It is, moreover a criminal offense.

Thanks to a veritable epidemic of mortgage fraud in an overheated housing market, many thousands of Texas homeowners are facing possible foreclosure. The Office of the Attorney General has mobilized to make every attempt to avert this looming crisis.


Residential Mortgage Fraud Task Force

HB 716, passed in the 2007 legislative session, directs the Attorney General to establish a Residential Mortgage Fraud Task Force to investigate and prosecute residential mortgage fraud and the perpetrators of mortgage fraud statewide.

The task force, headed by the Attorney General and including the Consumer Credit Commissioner, the Banking Commissioner, the Savings and Mortgage Lending Commissioner and other state officials, is charged by HB 716 "to take a proactive stance towards tracking and prosecuting mortgage fraud and the perpetrators of mortgage fraud statewide."

HB 716 also grants the OAG concurrent jurisdiction, with the consent of a county or district attorney, to prosecute mortgage fraud. Task force members will be sharing information and resources to help crack down on mortgage fraud.

Buyer Beware

Some home buyers are completely unaware that the lender has received misleading information about their qualifications as borrowers. Others may go along with a real estate agent who suggests stretching the facts. More often than not, however, the buyer will eventually be victimized.

Word to the wise: do not allow a real estate agent to influence you to misrepresent your financial situation in order to buy a home for which you do not qualify. You will be committing a criminal offense, and the person most likely to lose is you. If you don't qualify for a loan, odds are you will not be able to keep up with the payments.


Foreclosure "Rescue" Scams

In the midst of the foreclosure crisis, scam artists try to profit by offering fraudulent "mortgage rescue" services. Many of these services collect fees from consumers at risk of foreclosure and make promises that they will prevent the foreclosure. Instead they often speed the foreclosure process by taking excessive fees and advising the consumer to avoid speaking to their lenders to try to resolve their problems.

The Office of the Attorney General is cracking down on foreclosure scams as swiftly as they come to our attention. Do not believe a salesperson who tells you that he or she can avert the foreclosure of your home for a fee. Report the person to this office.

Never withhold a mortgage payment if you can possibly pay on time. In most cases where homeowners lost their homes, the problem began with a single missed payment.

If you are at risk of foreclosure you should contact your lender to try and make arrangements. In addition, if you have problems that could result in mortgage default or foreclosure, you should consider contacting a HUD approved counseling agency. You can find an approved counseling agency in your area by calling (800) 569-4287. You can also visit HUD's website at and for more information about how to avoid foreclosure.

You can also contact the Homeowner's HOPE Hotline at (888) 995-HOPE (4673). This toll-free number is operated by the Homeowners Preservation Foundation and Neighborworks America, two national nonprofit organizations that specialize in mortgage issues.


Nationwide Working Group

The Attorney General has convened a nationwide working group that includes some of the largest mortgage lending and loan servicing companies in the country. The Attorney General is asking these industry leaders to implement several important measures that are designed to prevent Texans from losing their homes to foreclosure.

By the end of next year, approximately $600 billion worth of subprime adjustable-rate mortgages are expected to reset into higher monthly payments for homeowners across the country. Attorney General Abbott urged Countrywide Mortgage, Houston-based Litton Loan Servicing, Dallas-based EMC Mortgage, Chase, Citibank, HSBC and Wells Fargo to implement several measures designed to preserve homeownership in Texas, improve consumer communication, and resolve complaints



If you have a complaint against your lender, contact our office, the FTC, HUD and the government agency that regulates your particular lending institution. Most mortgages are provided by traditional mortgage companies. In this case contact the Texas Department of Savings and Mortgage Lending. If your lender is a national bank, contact the Office of the Comptroller of the Currency. The Texas Department of Banking may be able to help you determine who regulates your lending institution if you are still unsure.