Mortgage fraud is a serious Class C felony punishable under federal law. It occurs in many forms, with lenders, homeowners, and prospective homebuyers all being susceptible to and having the ability to create mortgage fraud schemes.
If someone has accused you of mortgage fraud, it’s crucial to get in contact with an attorney right away.
What is Mortgage Fraud?
Mortgage fraud is the intentional misrepresentation or misinformation regarding the financing of a mortgage or the property itself. There are many ways mortgage fraud can occur, and both lenders and property buyers can create mortgage fraud schemes.
People can carry out mortgage fraud in external and internal manners. In the case of external fraud, the fraudster doesn’t have a relationship with the victim. In contrast, internal fraud means that mortgage brokers or other institutions use their resources to perform the scheme.
According to the FBI, there are two main categories of mortgage fraud. They include:
- Fraud for profit
- Fraud for housing
Fraud for profit schemes involves the mortgage lending process. For example, mortgage brokers, attorneys, or appraisers might intentionally use their knowledge of the housing industry or authority to mislead homeowners and lenders.
The FBI views mortgage lender frauds like these for-profit schemes as severe offenses and prioritizes them during their mortgage fraud investigations.
On the other hand, fraud for housing schemes is when an aspiring mortgage borrower misleads lenders or incentivizes appraisers to change a property’s value. The ways that fraud for housing occurs include falsifying income on loan applications and enhancing a person’s asset information.
It’s challenging for governments to determine how much money people lose to mortgage frauds each year. However, in 2010, the U.S. Department of Justice estimated that fraudulent loans totaled around $10 billion.
In response to the devastating financial impact that mortgage fraud has on victims, the Bureau of Justice Assistance awards compensations to eligible individuals.
Types of Mortgage Fraud
Within the general fraud for profit and fraud for housing sectors, there are dozens of schemes. Some examples include:
- Illegal property flipping
- Builder bailouts
- Equity skimming
- Air loans
Mortgage fraud also comes in the form of foreclosure rescue schemes. In these cases, the person performing the scam seeks out homeowners who are on the brink of defaulting on their mortgage. They convince the person that they can transfer the deed to an investor’s name, and they make money by creating a fraudulent appraisal and selling the property to that investor.
Older homeowners may also become victims of home equity conversion mortgage (HECM) fraud. In this case, scammers apply for a HECM in the homeowner’s name and convert the property’s equity into cash. Often, the homeowner never finds out about the scam. So, the fraud usually doesn’t become apparent to a mortgage lender until the homeowner passes away.
Commercial real estate loans are yet another form of mortgage fraud. It occurs when someone changes a property’s appraised value to obtain financing. They may create false leases to make the property appear more valuable. Ultimately, the borrower neglects the property and defaults on their loan, leaving lenders with a low-value commercial property.
Why Is Mortgage Fraud a White Collar Crime?
Mortgage fraud is a white-collar crime because it’s a financially motivated scheme that doesn’t cause anyone physical harm. White-collar crime requires the falsification of financial information that often uses the cover of a legitimately operating system for personal gain.
A mortgage fraud penalty varies depending on the scope of the scheme. But given that mortgage fraud is a Class C felony, federal law states that those convicted can face up to twenty years in prison and fines up to $5 million.
Because of the serious repercussions, if someone accuses you of mortgage fraud, you should immediately seek professional support.
How a Mortgage Fraud Lawyer Can Help
Given the severity of mortgage fraud penalties, it’s crucial to contact a lawyer with experience in this sector. A Zoukis Consulting Group, a mortgage fraud attorney will work with you to understand your side of the story and analyze the prosecution’s claims.
There are several ways a lawyer from Zoukis Consulting Group may be able to prove to the jury that you’re not guilty, including:
- Good faith belief
- No knowledge
- Substantial assistance
- Unlawful search and seizure
In the case that you plead or are found guilty, you may pay lower fines or spend less time in jail as a result of your lawyer’s work. Zoukis Consulting Group offers a free consultation so that you can determine if we’re a good fit for your case.
Schedule an appointment with us today to learn more about we can help you with your mortgage fraud charges.
Published Feb 15, 2022 by Christopher Zoukis, JD, MBA | Last Updated by Christopher Zoukis, JD, MBA on Mar 16, 2022 at 7:24 pm