New York Foreclosure Fraud Lawyer Explains the Offense
The upheaval in the real estate market in 2008 was a fertile breeding ground for many types of fraudulent behavior. Foreclosure fraud became incredibly common, and it seemed virtually everyone was engaging in foreclosure fraud schemes. From banks that robo-signed documents and allegedly engaged in other unlawful practices to take homes to companies who targeted homeowners to property owners and investors who sought to defraud lenders, foreclosure fraud flourished among groups and individuals on all sides of residential and commercial real estate transactions.
If you are accused of foreclosure fraud, you could face a lengthy prison term. Bank and wire fraud are two federal crimes you could be charged with, while residential foreclosure fraud is also a state-level offense in New York.
At the Law Office of Bukh Law Firm, PLLC, we have the experience you require when accused of any type of fraud related to foreclosures. We can defend banks and financial professionals, investors, and individuals who have been accused of violating the laws of foreclosure transactions. Give us a call today to schedule a consultation and learn more.
What is Foreclosure Fraud?
Foreclosure fraud is a term encompassing any type of scheme involving misrepresentations, false statements, or false promises related to foreclosure. The fraud scams must be designed to enrich the person or company making the fraudulent statements or false promises and/or must be designed to deprive the scam victim of the rightful value of his property.
Foreclosure fraud takes many forms including:
- Foreclosure rescue scams: This type of scheme involves charging a fee for “foreclosure relief” and not providing any such relief. Homeowners who were in danger of losing their homes receive advertising material promising them that the home could be saved. After paying fees, the homeowners are often told that their houses are too far gone or that staving off foreclosure is not possible. Thousands of homeowners paid out exorbitant fees (sometimes several thousands of dollars) to get none of the foreclosure help that they were told they’d receive.
- Foreclosure fee inflation: Service providers charge exorbitant fees to serve notices of foreclosure on homeowners. While a traditional fee for service of process should total a few hundred dollars, some service providers were paid thousands of dollars to give papers to homeowners. The costs of these fees were passed on to the homeowners, who become responsible for paying for the money the mortgage lender spent on the foreclosure process as part of a foreclosure judgment.
- Fractional ownership transfers: This is a special type of foreclosure rescue fraud. The process involves a homeowner signing over a part interest of the home to a company that promises to stop the foreclosure. The company then hires “straw homeowners” and gives them the ownership interest. The straw owner files for bankruptcy and the foreclosure process is delayed. Homeowners were frequently misled into believing these scams could help them save their house, but instead the homeowner simply ended up paying a monthly fee as well as giving up partial ownership in the home as the foreclosure process was strung along.
- Improperly taking ownership of foreclosed homes: Many homes that were in default or with pending foreclosures were vacated by their rightful owners. One foreclosure fraud scam involves using forged quit claim deeds to make it appear that a person or company owns several foreclosed homes. The homes were then rented out to unsuspecting tenants.
These are just a few of many examples of different types of foreclosure fraud. When the fraud is considered an attempt to take assets, money or items of value from a bank, the defendant may be charged with bank fraud under U.S. Code Section 1344. This offense alone can result in a potential penalty of $1,000,000 and up to 30 years imprisonment.
Bank Foreclosure Fraud
While some foreclosure fraud scams target financial institutions, many banks also engage in fraudulent behavior. Mortgage fraud by banks also takes many forms including:
- Document forgery: Mortgages are frequently sold and resold by lending institutions. This could result in some lenders having ownership of a mortgage loan but not having the paperwork to show a right to collect. Banks could create documents after the fact to make it appear as if the paperwork was in order. An electronic database called MERS is supposed to track mortgage transfers, but there was little quality control. In fact, as part of a 2011 settlement with federal regulators, MERS promised to improve controls to avoid fraudulent assignments and database errors.
- Robo-signing: Mortgage paperwork is supposed to be carefully checked before a foreclosure moves forward. Many lending institutions, however, had unqualified people rubber stamping foreclosures and signing off on thousands of actions per month without actually doing a thorough review of documents.
- Mortgage modification fraud: To help people save their homes, the government created mortgage modification programs and incentivized lenders to participate. Some lenders have been accused of failing to honor loan modifications that were transferred from other mortgage servicers. Others demanded payments with promises of negotiating a modification and then never followed through on the modification. Still others delayed decisions on short sales or claimed never to have received paperwork so that foreclosure could move forward, even as homeowners were trying to participate in mortgage modification.
Because of the foreclosure fraud by banks, a foreclosure fraud settlement was reached in which the five largest mortgage services were supposed to provide $5 billion in direct payments to defrauded homeowners and were supposed to take an additional $20 billion worth of action to provide relief to homeowners, such as reducing principal balances or interest rates.
The government continues to pursue action against banks for foreclosure fraud. Banks could face criminal and civil actions. Lending institutions, as well as financial professionals who may have been part of fraud schemes, should consult an attorney.
Getting Legal Help With Mortgage Foreclosure Fraud
If you are accused of foreclosure fraud, the Law Office of Bukh Law Firm, PLLC can provide the legal representation that you need to fight the charges and try to protect yourself from penalties. Call today to learn more about how our New York City foreclosure fraud lawyers can help.