A New York Fraud Lawyer Explains Mortgage Insurance Fraud
Mortgage insurance is a type of insurance policy designed to protect a lender in case of default. Homeowners who purchase a home with less than a 20 percent down payment are typically required to purchase mortgage insurance. There are two types of mortgage insurance: mortgage insurance obtained from the gover nment for those who have VA or FHA loans, and mortgage insurance purchase from the private sector. Mortgage insurance purchased on a private loan is called PMI.
PMI became popular in the years leading up to the 2008 financial crisis when many borrowers were given the opportunity to purchase homes with low or no down payments. While mortgage insurance can make it easier for homeowners to obtain homes without significant savings (unless they apply for a Non-QM mortgage), there are situations where mortgage insurance fraud can occur. Since mortgage insurance fraud is often part of a larger fraud scheme to avoid repaying a mortgage loan, serious criminal penalties for bank fraud often follow.
When you are facing legal charges that could result in prosecution in federal court and decades of imprisonment, you need a lawyer who can handle your complex criminal case. Bukh Law Firm, PLLC has experience with mortgage insurance fraud and can provide you with the representation you need to fight the charges or try to negotiate the most favorable plea deal you can.
What is Mortgage Insurance Fraud?
Mortgage insurance policies pay out to a lender, not to a homeowner. If a homeowner covered by PMI defaults, the insurer pays out to the lender to cover resulting losses.
Any property owner who purchases mortgage insurance to fulfill loan requirements and who subsequently participants in a mortgage fraud, foreclosure fraud, or short sale fraud, could potentially be guilty of mortgage insurance fraud.
Homeowners who knowingly make false claims about their income, assets, or ability to pay when applying for a loan and obtaining PMI can also be found guilty of a fraud offense.
In every criminal case for mortgage insurance fraud, a prosecutor must be able to prove intent to make misleading or false statements in order to secure a conviction.
Mortgage insurance fraud occurs whenever a property owner or other individual participates in a scheme to avoid repayment of a mortgage that is backed by government or private insurance. Examples may include:
- Making misleading statements about income, employment, or assets on a loan application for mortgage and/or an application for mortgage insurance.
- Short sale fraud: PMI pays when a home is sold for less than is owed in a short sale. Short sale fraud can occur when a lender approves a sale of a home for less than the mortgage balance based on a misrepresentation of the property’s value.
- Appraisal fraud: The value of a property is deliberately overstated so a borrower can obtain more money from a mortgage lender than the property is worth. The home ends up in foreclosure and the mortgage insurer ends up paying when the homeowner walks away.
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These are just a few of many examples in which a mortgage insurance provider is defrauded. Whenever a homeowner or property owner obtains mortgage insurance under false pretenses and/or with the intent not to pay the loan in full, this is considered mortgage insurance fraud.
Penalties for Mortgage Insurance Fraud
Mortgage insurance fraud has serious consequences because it routinely accompanies mortgage fraud. Fraud against banks and financial institutions is a federal crime under 18 U.S. Code Section 1344. The offense carries potential penalty of 30 years imprisonment and a fine up to $1 million. You can be charged even if you did not specifically intend to defraud a financial institution, as long as your scheme was likely to result in a bank being mislead and/or losing funds or assets.
In addition to bank fraud, there are other federal and state offenses you could be charged with including residential mortgage fraud under Article 187 of the NY Penal Code, and Insurance Fraud under Article 176 of the NY Penal Code.
Contact a NY Mortgage Insurance Fraud Lawyer
Bukh Law Firm, PLLC provides legal representation to clients accused of mortgage insurance fraud, mortgage fraud, and all types of white collar crimes. If you are under investigation or have been indicted or arrested, call us immediately so we can start advocating for you and fighting to help you get the best outcome you can in a high-stakes situation.