Mortgage fraud is a non-violent, white collar criminal offense perpetrated against or by a bank, lienholder, or other financial institution. Mortgage fraud can involve the use of fraudulent means to obtain or secure a mortgage loan that is larger than your financial situation can honestly afford. Mortgage fraud can also involve any use of false pretenses, misleading statements, or fraudulent transactions to improperly obtain money, assets, or items of value from a bank or lending institution.
The Law Office of Bukh Law Firm, PLLC has a great deal of sympathy for individuals being charged with crimes like mortgage fraud. In many cases, predatory banks use threats of mortgage fraud to repossess the dwellings of individuals who have difficulties with payments or mortgage terms. Many times, accusations of mortgage fraud are also used as a defense to their own banking or lending transgressions.
Mortgage Loan Fraud Investigations
Before 2008 when the financial crisis rocked America, banks, lenders, mortgage brokers and other professionals involved in the procurement and peddling of real estate had what amounts to a financial free-for-all. Financial data was manipulated, massaged and often pulled from thin air. In the rush to get a dollar as fast as possible, the real estate marketplace often encouraged potential buyers to look the other way as greedy salesmen and their support played fast and loose with the truth.
Real estate professionals had reason to believe the gravy train would continue forever. The U.S. government had a history of settling criminal cases with a technique called “delayed prosecution.” Delayed prosecution amounted to nothing more than a slap on the wrist after corporations and their staff helped place customers into real estate that cost more than what the buyer would normally be eligible for.
With few real penalties and virtually no oversight, mortgage fraud schemes flourished. In fact, in 2004, the FBI warned Congress that mortgage fraud was becoming so omni-present that theavalanche of corruption could trigger a massive financial crisis. According to a December 2005 press release, the FBI said, “…mortgage fraud is one of the fastest growing white collar crimes in America.”
In 2008, as the bubble burst, the federal government started to rethink its approach to dealing with unethical business practices. Under the management of U.S. Attorney General, Eric Holder, a push to rein in the Wild West days of real estate started.
Now, the pendulum has swung the other way and defendants who are accused of mortgage loan fraud can expect to face aggressive prosecution at the state or the federal level.
The Federal Bureau of Investigations, the criminal division of the IRS, the FTC, the Department of Justice, and the Consumer Financial Protection Bureau are among the federal agencies who now conduct investigations into allegations of mortgage fraud or into suspected mortgage fraud schemes.
If you are believed to have been involved in any kind of mortgage fraud, there is a very real risk of serious federal charges that could result in decades of imprisonment. You need to protect yourself by contacting mortgage fraud lawyers at Bukh Law Firm if you are under investigation or if you have been indicted.
Mortgage Fraud in New York
Mortgage Fraud has also taken center stage in New York. Mortgage fraud has been seen as a major contributor to the financial collapse throughout the country, but special distinction goes to New York where property values are advanced past the national average. New York has publicized the formation of a Mortgage Fraud unit that focusing on investigating, and prosecuting, mortgage fraud in the Empire State.
New York Penal Law Section 187.05 criminalizes mortgage fraud, making the offense a felony any time more than $1,000 in money is taken as part of a fraud scheme and a misdemeanor
if fraud schemes involve less than $1,000. Defendants can also be charged with other related offenses depending upon the kind of mortgage fraud they have been accused of participating in.
What Constitutes Mortgage Fraud?
There are countless types of mortgage fraud involving individuals and companies with all different roles in real estate transactions. Fraud crimes can involve professionals within the lending industry, such as mortgage broker fraud. It can involve straw buyer fraud, income mortgage fraud, or commercial mortgage fraud. Virtually any scheme or artifice intended to improperly qualify for a mortgage or to obtain funds from a lender that you know or suspect will not be repaid could be considered a type of mortgage fraud scam.
Types of Mortgage Fraud
Some of the most common types of mortgage loan fraud include:
- Foreclosure fraud: Foreclosure fraud takes many forms including equity stripping, title fraud, and foreclosure rescue scams. Desperate homeowners may turn over title to try to “save” their home. Once title has been improperly obtained, the company or investor takes a home equity loan or mortgage to cash out whatever equity remains, and then leaves the home and reneges on the loan, with both the original owner and the lender in a worse position.
- Builder Bailout: Builders who cannot sell new construction homes inflate the purchase price of a home by lying about offering downpayment assistance or using other techniques. Builders may also use straw buyers or shell affiliates to “purchase” An impression is created that suggests builders are successfully selling homes. A mortgage is obtained based on inflated purchase prices, and the loan-to-value ratio exceeds 100 percent, leaving the lender exposed.
- Mortgage broker fraud: Brokers are in a position to become involved in numerous types of mortgage fraud schemes because of the privileged role that brokers play within the lending industry. One common example of fraud involving a broker is when a fake loan application is created using the identity of a real person to “buy” a fake property. When the loan is funded, the “seller” takes the money from the mortgage loan, and the lender is left without the anticipated collateral.
- Mortgage servicing fraud: A company that services mortgage diverts money for its own use rather than for the purpose the funds were intended to serve. Money may be diverted from escrow accounts, or from payments of principal and interest.
- Reverse mortgage fraud: Title to property is improperly obtained, often through identity theft or false promises to the owner. The property is deeded over to a straw buyer or co-conspirator who meets the age requirements to qualify to obtain a reverse mortgage. A cash-out lump sum reverse mortgage is obtained or a reverse mortgage is obtained in which money is paid out monthly.
- Straw buyer fraud: Someone acts as a buyer on a home and signs mortgage documents for that home, despite having no intention to ever live in the home or pay the mortgage. The straw buyer may purchase the home for someone else with bad credit (including relatives, family members or even strangers) or there may not actually be a real buyer who exists.
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- Mortgage application fraud: Mortgage applications must be completed with 100 percent true information. Including dishonest information on a mortgage loan application can result in perjury charges, as well as other fraud charges.
- Mortgage occupancy fraud: Mortgage occupancy fraud involves applying for a mortgage and claiming intent to live in the home, with no actual intent to live there. A mortgage for a primary home that you intend to occupy will generally have a lower interest rate and lower down payment requirement than a mortgage for a secondary home or investment property. Some mortgages, like those with special terms for veterans or first-time buyers, may require you to occupy the home in order to obtain the specific type of loan being applied for.
- Appraisal fraud: A home may be improperly appraised too high to allow a buyer to take a mortgage for more than a home is worth. The lender is left exposed. Appraisals may also be artificially low when short sales occur, making it possible for a house to be sold for less than its worth and leaving the lender to cover the shortfall.
- Commercial mortgage fraud: Commercial mortgage fraud can involve many of the same schemes to defraud as residential mortgage fraud; however larger amounts of money are often at stake because commercial investment properties are typically much more expensive to buy.
- Subprime mortgage fraud: Subprime mortgages are mortgages at high interest rates offered to borrowers who are considered a bad credit risk. Subprime mortgage fraud is generally considered to have been largely responsible for the 2008 financial crisis. Mortgages were offered to unreliable borrowers who plainly could not repay the loans. Often, these loans were interest only, adjustable rate loans and/or loans that required a balloon payment. The loans were re-packaged, given an AAA credit rating, and resold to investors. Subprime mortgage fraud still occurs today despite efforts to make changes after 2008, and it often involves mortgage brokers or other professionals pushing mortgages on people with misleading terms and aggressive advertising.
- Income mortgage fraud: Income mortgage fraud involves making misleading statements about income in order to qualify for a larger mortgage. Although banks and brokers encouraged this before the 2008 crisis, ultimately the person who signs the application and lies about income can be held accountable for committing a fraud offense.
- Mortgage assignment fraud: Mortgage lenders can assign a mortgage loan. However, certain legal procedures must be followed.Mortgage assignment fraud may have played a role in the financial crisis and in subsequent foreclosure scams. Mortgages were converted into bonds and sold leading up to 2008. Trustees pooled the mortgage loans and sold the resulting securities to investors; however the mortgage and promissory note must have been physically conveyed into the trust in order for this process to work correctly. The note had to be endorsed along with a mortgage assignment confirming ownership would be transferred. When mortgages weren’t properly transferred, the mortgage-backed securities wouldn’t actually have any mortgages backing them. Some lawsuits allege that mortgage assignments weren’t delivered to the trusts, although trustees and investors told the SEC and investors they were. This made it impossible to establish that the trust owned the mortgages. Without the ability to actually establish ownership, false documents were created to foreclose on properties, leading to massive litigation and lenders settling claims of improper foreclosure practices.
- Mortgage Insurance fraud: Federal mortgage insurance programs, as well as private insurers, may be the victims of mortgage insurance fraud. This can occur when misleading and improper statements are made to insurers that make proper underwriting of insurance coverage impossible.
These and other common mortgage loan fraud schemes can result in significant financial loss. Cases involving mortgage fraud schemes are taken seriously by investigators and prosecutors. State and federal agencies may launch vigorous investigations based on accusations of mortgage fraud, and your financial accounts may be frozen during investigations. Criminal and civil forfeiture, jail time, and other very serious penalties are a possibility.
Mortgage Fraud Penalties
Many participants in mortgage fraud schemes are charged with multiple federal offenses including bank fraud, wire fraud, and mail fraud. Any one of these charges could ruin your life. Mail fraud and wire fraud each carry penalties of up to 30 years in jail and a $1 million fine, as does a charge of bank fraud. New York’s mortgage fraud laws also make mortgage fraud a felony in almost all cases. Other possible charges at the state or federal level could include identity theft, writing bad checks, participation in schemes to fraud, perjury, and a host of other serious criminal charges.
You may be able to reduce the mortgage fraud penalty that you face if you negotiate a plea deal with the prosecutor or district attorney before you are found guilty. During the mortgage fraud sentencing phase, you could also argue that there were mitigating factors.
Your mortgage fraud attorney, however, is going to try to prevent things from getting that far by helping you try to enter a plea before conviction or by assisting with defending yourself and introducing reasonable doubt about your guilt. The prosecutor has the burden of proving that you violated mortgage fraud laws or committed other crimes you are accused of, so you can avoid conviction and any mortgage fraud penalty if you can just introduce reasonable doubt.
Hire a Mortgage Fraud Lawyer
The experienced criminal attorneys at Bukh Law Firms have helped hundreds of clients charged with mortgage fraud to get results in their case that they were happy with. Each case is unique, and the outcome of your case will depend upon the types of charges faced as well as the strength of the case that you and the prosecutor each present.
It is vital to work together with your assigned mortgage fraud attorney from New York’s office of Bukh Law Firms so that you can give your lawyer the weapons needed to safeguard your freedom.
Our experienced attorneys will bring our legal knowledge and background in real estate fraud cases to help you defend against criminal accusations that could change your life.
Call today to schedule a consultation and learn more.