What we collectively refer to as mortgage fraud includes various illegal schemes involving some type of misrepresentation or misstatement on mortgage documents. For example, a home buyer, mortgage broker and/or other real estate professional who submits fake W-2 forms or procures an inflated property appraisal has engaged in mortgage fraud.
In general, fraud involves two parties: the party providing false information and the party that relies on that information to complete a transaction. Such crimes commonly are prosecuted as wire fraud, bank fraud and conspiracy (federal statutes do not directly reference "mortgage fraud").
FERA and the Prosecution of Mortgage Crimes
The Fraud Enforcement and Recovery Act (FERA) enacted in 2009 expanded the reach of federal law enforcement officials in enforcing mortgage fraud laws. Sentences under FERA can include $1 million fines and 30-year prison sentences. Some states also have laws that address crimes related to fraud in the mortgage industry.
An investigation may also lead to additional charges of bankruptcy fraud or tax fraud. Although unscrupulous mortgage brokers, appraisers, real estate attorneys and other real estate professionals tend to be the ones targeted by investigations, home buyers are sometimes arrested for providing inaccurate information.
Law enforcement officials recognize two main categories of fraud related to mortgages:
Common Types of Mortgage Fraud
Mortgage transactions, which involve multiple parties and large sums of money, provide ample opportunities for fraud. Some such schemes are extremely sophisticated and unique, but the following types are the most common:
State Mortgage Fraud Laws
More than one-third of U.S. states, including California, Florida and New York, have laws prohibiting at least one form of fraud related to mortgages. The New York law (NY Penal Code, article 187), for example, defines "residential mortgage fraud" as an intentional act that involves statements that contain materially false information or that conceal information for purposes of misleading another party. The crime is prosecuted as a class A misdemeanor all the way up to a class B felony, depending on the severity of the offense.
Federal sentences tend to be more severe than state sentences for equivalent mortgage fraud convictions. Talk to a local attorney to find out more details about the laws in your state, including ways to avoid being a victim of this crime.
Civil Liability for Mortgage Fraud
Those accused of committing mortgage fraud may also be held liable for monetary damages incurred by the lender. Civil claims may be based on contractual theories, misrepresentation and/or deceit, conspiracy to defraud the lender or breach of trust. Third parties involved in the fraudulent transaction, such as mortgage brokers or appraisers,may also be liable for damages.
Charged with Mortgage Fraud? Get in Touch with an Attorney
Inflating a property's value, overstating your income on a loan application, or colluding with another investor to buy property are all vigorously investigated and punished. If you're being investigated for mortgage fraud, or any other crime, it's a good idea to contact a local criminal defense attorney to discus the facts of your case.