Federal Mortgage Fraud Violations
Federal Mortgage Fraud Violations
Federal Mortgage Fraud violations occur when someone engages in fraud by misusing the housing market/sales system. There are two primary categories which constitute mortgage fraud violations. These are…
- Fraud for Housing – This happens when someone seeks a mortgage and provides inaccurate, incomplete, or intentionally false information in order to secure a loan or better loan terms. Although strictly criminal, this form of mortgage fraud is seldom treated as criminal except in some states and rarely by the Federal government.
- Fraud for Profit – The U.S. mortgage industry is complex and offers many opportunities for fraud to occur. When professionals take advantage and commit mortgage fraud, it generally involves parties in other states. The interstate nature of the fraud makes the charges Federal. Also, the fraud could involve Federal agencies or property, which would also send the charges into the Federal jurisdiction.
What Constitutes a Federal MortgageFraud Violation?
Any material misrepresentation when seeking a mortgage is a violation of Federal Mortgage Fraud and most state mortgage fraud laws. However, intent is the key.
The mortgage fraud laws were not created to punish mistakes, only intentional efforts to defraud via the housing market. Thus, the simple mistake on a mortgage application will not likely land someone in hot water with law enforcement. Rather, investigators seek patterns of conduct which indicate intentional efforts to increase the return on investment (ROI) by illegal means.
There are 15 known mortgage fraud schemes and elements of schemes which are commonly used. These are…
- Appraisal fraud – occurs when the appraisal is either inflated or understated for any reason.
- Cash-back schemes – involves overinflating the selling price of a property for the purpose of providing the buyer with “cash back” and the seller with the same. Thus, the lender loans more than they would otherwise. Generally, such schemes involve an appraiser who likewise alters the appropriate appraisal documents in favor of the scheme.
- Employment fraud – occurs when someone states on a loan application a non-existent job or one which is not actually held for the purpose of getting a loan or getting better interest rates.
- Equity Skimming – In this scheme, a straw buyer is used to make the initial purchase, but after closing signs over all rights to the property to an investor. The investor in turn never makes a mortgage payment but rents the property until foreclosure, pocketing the gain.
- Failure to disclose liabilities – failing to disclose liabilities, such as a new credit card not yet showing on the credit report or a liability not reported. Doing so skews the underwriting process and changes the loan parameters in favor of the buyer.
- Fraud for profit – Fraud for profit involves multiple parties and carefully-crafted schemes for the purpose of obtaining a mortgage which will go into default by plan. Usually, there is a straw buyer, though not always.
- Fraudulent Supporting Loan Documentation – When a party to a mortgage loan submits falsified documents such as altered or forged paycheck stubs, it is mortgage fraud.
- Identity theft – seeking a mortgage loan using the identity of another person.
- Income fraud – is the overstatement or inflating of income in order to qualify for a loan or better interest rates.
- Occupancy fraud – Occurs when someonemakes a purchase of a home for investment purposes but misrepresents. By claiming that the property will be used as a home rather than an investment, the interest rates will be lower. This results in savings, but at a loss to the credit agency.
- Property Flipping–This is a scheme involving appraisal fraud. The property is purchased for a low price then quickly reappraised for a higher amount and just as quickly resold “flipped” for the higher mortgage amount.
- Shot-gunning – When multiple loans are taken out simultaneously for the same property. This generally results the property entering foreclosure and the lenders fighting each other for scraps.
- Silent Second – When a buyer takes out a second loan to cover the down payment without disclosing this to the lender, mortgage fraud has occurred.
- Straw Buyer– A straw buyer is one whose identity is hidden during much of the mortgage transaction; a nominee is used along with that person’s credit history.
- Working the gap – This is perhaps the most sophisticated means by which Mortgage fraud occurs. The object is to use the timeline gaps in the U.S. Mortgage system to perpetrate fraud. The one working the scheme generally has a good understanding of the time required to record and post loans and other important mortgage documents. This permits time to take out additional loans or use the property in other ways to skim additional revenues. The shot-gun approach is often tied to working the gap and at times, the two terms may be used synonymously, though this is not the case.
Federal Mortgage Fraud violations almost always involve other than one person. This is because of the complexities of the housing market and the potential for larger gain when others assist in the fraud.
What are the Penalties if Convicted of Federal Mortgage Fraud?
If convicted of Federal mortgage fraud, the penalties can be severe. These are
- Prison – Misdemeanor can receive up to one year in jail whereas felony fraud convictions can result in up to 30 years in a Federal Penitentiary.
- Fines – up to $1 million per count
- Restitution – no limit
- Probation – Probation sometimes does occur in the event of a conviction and when it does, the term is generally a year or more.
In addition to these, civil penalties/lawsuits will likely result in substantial penalization. There is no limit to the monetary damages which may be rendered in the case of a civil lawsuit, especially if you lose your criminal case. For this reason, you need an attorney with experience in both Federal Mortgage Fraud criminal charges as well as civil litigation defense. You need Jason Korner.
What Are Defenses to Federal Mortgage Fraud Violation Charges?
When defending Federal Mortgage Fraud charges, your attorney will ardently challenge all government evidence. Depending on the reason for the charges, your defense may be ignorance or some other reason for the discrepancies which resulted in a failure of loans. For instance, there may have been clerical errors or improper record-keeping on the part of other players involved.
One of the first strategies will be, if possible, to get your case eliminated on the grounds that you simply made a mistake. That failing, there will be other ways to poke holes in the prosecution’s case.
Remember, intent to commit Federal mortgage fraud is necessary to prove the act criminal. So a key strategy will be to force the government to prove intent.
Facing a FederalMortgageFraud Charge? Call Criminal Defense Attorney Jason Korner Now!
If you are facing Federal Mortgage Fraud charges, you need to get in touch with the Law Offices of Jason A Kroner now. Our offices are conveniently located west of the city at7911 Forsyth Blvd, St. Louis, MO 63105. Call us now to schedule your free consultation.
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