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Federal Mortgage Fraud Attorneys

July 10, 2020

In general, mortgage fraud is characterized as a form of misstatement, misrepresentation, or omission in connection with a mortgage loan. In the  majority of cases, an individual commits mortgage fraud when he/she knowingly gives a false statement that impacts the bank’s decision to, for instance, approve a loan, lower a payoff amount, or agree to repayment terms. If federal agents were in the business of prosecuting accidental omissions or errors, almost 10 percent of mortgage applications would be fraudulent. It is the intent of the applicant that makes mortgage fraud a federal crime.

If you or someone you love one has been charged with, or is the target of an investigation for, mortgage fraud, it is important that you hire a federal defense lawyer who is experienced in mortgage fraud as quickly as possible. 

Federal Legislation and Potential Penalties for Mortgage Fraud

Since there are no federal statutes that directly refer to “mortgage fraud,” federal prosecutors may charge alleged offenders with other offenses, including wire fraud, bank fraud, and even conspiracy. Nevertheless, the Fraud Enforcement and Recovery Act (FERA), enacted in 2009, extended the powers of federal law enforcement to prosecute any kinds of fraud, including mortgage fraud. Pursuant to FERA, convicted persons may be looking at sentences that include up to $1 million in fines and as much as 30 years imprisonment.

Furthermore, in the wake of the housing market collapse, the FBI and other federal agencies have expanded the legal definition to more effectively prosecute individuals who target distressed homeowners. The FBI further split fraudulent activity up into two specific areas:

  1. Fraud for Profit — A great many of fraud schemes involve industry insiders, such as mortgage brokers, bank officers, appraisers, and other professionals. When these insider individuals carry out a “Fraud for Profit” scheme, they are in the habit of misusing a stage in the mortgage process to steal cash or equity from lenders or homeowners.
  2. Fraud for Housing — In general, this form of fraud involves borrowers who carry out illegal actions to acquire or maintain ownership of a property.

Under FERA, the statute of limitations for these two forms of fraud is 10 years, and the statute of limitations can be tolled if the defendant is outside of the country.

Forms of Mortgage Fraud

In addition to the two genres of mortgage fraud detailed in the above section, the FBI has pinpointed several ways that offenders can commit fraudulent acts. These kinds of mortgage fraud are:

  • Property flipping — After purchasing a piece of real estate, the property is falsely appraised at a greater value and then quickly resold.
  • Inflated appraisal — An appraiser, often collaborating with a mortgage broker or loan officer, gives an unrealistically high value on a property in order to match a buyer’s offer and complete a deal.
  • Fraudulent supporting loan documentation — A loan applicant gives in altered, forged or falsified income details or otherwise fraudulent documentation
  • Straw buyers — The purchaser of property conceals his/her identity through the use of a nominee, whose name and credit history are used to make the loan application.
  • Silent second — The property owner takes out a second mortgage to finance the down payment on the first loan.
  • Equity skimming — The investor uses a straw buyer, fake credit reports, and phony documentation to get a mortgage in the straw buyer’s name. After closing, the straw buyer then signs the property over to the investor and gives up all property rights. The investor doesn’t make any payments on the property, but he or she rents it out until the property is foreclosed.

Federal agents thoroughly investigate and prosecute these kinds of schemes, on top of  many others. That said, nothing is set in stone in a mortgage fraud matter.  With the help of a qualified and expert defense attorney, there are methods by which to challenge these types of mortgage fraud charges and achieve a desired legal outcome.

Mortgage Fraud Penalty, Charges, Laws & Statute of Limitations

Mortgage fraud entails the intentional misrepresentation or omission of information to secure a mortgage loan. You may not hear a lot about mortgage fraud crime, and this is because it is such a complex crime.

There is a ton of paperwork involved with mortgage loans. Are accidental errors or misrepresentation of information fraudulent? Not necessarily, the intent is what makes errors on a mortgage loan application to be fraudulent.

A mortgage fraud case may never make it to a court because it is hard to prove that someone intentionally provided inaccurate information.

For this type of case to uphold in court, there would have to be without reasonable doubt that someone had the sole intent of lying or omitting information to receive a mortgage loan.

Fraud Enforcement and Recover Act (FERA)

The 2009 Fraud Enforcement and Recover Act (FERA) is the law that governs mortgage fraud. Within this act, there are specific prison sentencing and fines associated with mortgage fraud. The federal government instituted FERA in 2009, but each state also has its own policies governing mortgage fraud.

If someone is charged with mortgage fraud, other charges are often connected to the crime. Bankruptcy fraud and tax fraud are sometimes charges that are linked to mortgage fraud.

Who Is Charged With Mortgage Fraud?

The people that are most commonly charged with mortgage fraud are:

• Real estate agents & professionals
• Appraisers
• Real estate attorneys
• Mortgage brokers

The above list is not conclusive. An individual homebuyer or family can also be charged with mortgage fraud.

Mortgage Fraud Laws

As mentioned, mortgage fraud can be complicated. There are two different categories of mortgage fraud. They include:

• Mortgage Fraud for Housing
This type of mortgage fraud is when someone uses false or inaccurate information to receive a better interest rate or buying terms when purchasing a home.
• Mortgage Fraud for Profit

Real estate professionals can be charged with the aforementioned crime. Fraud for profit is when a real estate professional submits false or inaccurate information to receive more money and incentives from a real estate deal.

What Are The Crimes & Charges Associated With Mortgage Fraud?

To be charged with mortgage fraud, you have to intentionally submit false information to receive a mortgage loan. If there are accidental errors or mistakes, this does not qualify as a mortgage fraud crime. The problem with mortgage fraud is making the distinction between an intentional lie and an error.

It is easier to prove that a real estate professional is involved in mortgage fraud, than an individual homebuyer. Often, a real estate professional may be involved in repeated offenses which could lead to being charged with mortgage fraud. There is a possibility for federal prosecution in a mortgage fraud case. Usually, this level of prosecution is for fraud for profit cases.

Racketeer Influenced and Corrupt Organization (RICO) charges can also be associated with mortgage fraud cases. Again, mortgage fraud for profit is typically the culprit for this type of charge. A RICO charge holds a severe prison punishment.

What Penalties Are Associated With Mortgage Fraud?

Serious penalties are connected to mortgage fraud. Often, mortgage fraud is not charged individually. There are multiple crimes and charges that are included in addition to the mortgage fraud charge. Mortgage fraud can exist at both the state and federal government levels.

Mortgage fraud is considered a felony. The only instance in which mortgage fraud can qualify as a misdemeanor is when financial fraud is less than $1,000.

Common penalties connected to mortgage fraud are:

• As much as 30-years in federal prison (if charged at the federal level)
• As much as 5-years in state prison (if charged at the state level).
• Significant fines, a federal charge can lead to a $1M fine. A state charge can range up to $100,000.
• Restitution of one year following a prison sentence
• The possibility of probation

Sentencing Guidelines for Mortgage Fraud

To determine mortgage fraud sentencing, the crime has to first be categorized. Mortgage fraud for profit has a more serious offense and charge than mortgage fraud for housing.

The duration of time for the crime and the amount of money involved determines the severity of the crime. A judge can also factor in additional crimes into the overall sentencing. The statute of limitations for mortgage fraud is 10-years.

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