What to Do If Charged With Mortgage Application or Qualification Fraud
Mortgage application fraud involves providing intentionally false or misleading information on a mortgage loan application to entice a lending institution to provide a loan. Because the fraud schemes involve an attempt to improperly obtain funds from a financial institution, you could face federal bank fraud charges when accused of mortgage application fraud.
At Bukh Law Firm, PLLC. our New York criminal defense lawyers have provided comprehensive legal representation to clients accused of mortgage application fraud. We represent individuals, investors, companies, mortgage brokers and lending institutions who have been accused of mortgage fraud offenses .
We will work hard to help fight for your freedom and to try to reduce penalties or avoid conviction for a mortgage fraud offense.
Types of Mortgage Application Fraud
Mortgage application fraud can be broadly divided into two different categories: fraud to acquire housing and fraud to make a profit. Individuals borrowers typically commit fraud in order to qualify for a loan they otherwise would not be eligible for so they can purchase a house. This is referred to as qualification fraud.
Companies and professionals, including real estate brokers and mortgage brokers, typically commit fraud for profit. A realtor, for example, could find a straw buyer for a homeowner who couldn’t otherwise qualify for a home loan. A broker could help a borrower to provide dishonest information about income to qualify for a larger loan, earning a larger commission for a broker.
How Does Loan Application Fraud Work?
The Federal Bureau of Investigation describes the most common types of loan application fraud including:
- Borrowers providing misleading information about income, overstating the amount they are making to qualify for a higher loan amount.
- Borrowers providing misleading information about their employment. Most mortgage lenders require borrowers show two years of steady employment with the same employer before qualifying for a loan.
- Borrowers providing incorrect information about their outstanding debt balances. Mortgage lenders have a maximum debt-to-income ratio for borrowers, and understanding debt balances makes the debt-to-income ratio appear lower. Failure to disclose that down payment money is borrowed from a friend, family member, employer or other source is a common type of loan application fraud.
- Failure to disclose other pending financial obligations. A new loan may not show up on a credit report for as long as 30-60 days after the loan is funded. A borrower who fails to disclose that a new loan is pending, or that they have recently borrowed, is considered to be committing loan application fraud. In one type of fraud scheme, a broker has a straw buyer apply for multiple mortgage loans on the same property. All loans close on the same day or within days of each other and the broker and buyer take the money while the mortgage lenders are left with a property that cannot support all the loans with conflicting claims.
- Occupancy fraud. This type of fraud occurs when a mortgage applicant claims that he intends to live in the house but doesn’t actually plan to reside in the home. Straw buyer schemes commonly involve someone with good credit applying for a loan and buying a home for someone with bad credit. This is a form of occupancy fraud. The straw buyer is paid a financial incentive (often arranged by the realtor) and claims he will be living in the home and paying the mortgage when he won’t.
If you play any part in these or other mortgage application fraud schemes, you can be held responsible not only for your own actions but also for any criminal activities by co-conspirators. This means that if you agree to be a straw buyer or agree to falsify employment records, your small role in the scheme could be enough to lead to criminal prosecution for very serious charges.
Penalties for Mortgage Application Fraud
Mortgage application fraud frequently leads to federal charges for offenses like bank fraud; postal fraud; and wire fraud. Each of these separate offenses carries a potential penalty of 30 years in jail and a $1 million fine when a part of the scheme is to take assets from a financial institution.
In New York state, residential mortgage fraud is a criminal offense under New York Code Article 187. Article 187 imposes different penalties for different degrees of mortgage fraud. Residential mortgage fraud in the fifth degree is a Class A misdemeanor. However, if the fraud scheme involves $1,000 or more, the offense is elevated to a felony. First, second, third, and fourth degree mortgage fraud are all felonies and the penalties get progressively more serious when fraud schemes are attempted involving larger sums.
Getting Help from a Mortgage Application Fraud Lawyer
You are at risk of a long prison term, a huge fine, and a criminal record that disqualifies you from many jobs if you are convicted of mortgage application fraud. You need to do everything you can to try to avoid being convicted or to minimize the penalties and consequences of this serious offense. One of the best things you can do is contact a New York mortgage fraud defense lawyer who knows the ins-and-outs of these complicated financial crimes.
At Bukh Law Firm PLLC,, our New York criminal defense lawyers have represented many clients accused of all types of mortgage fraud offenses. Give us a call today to schedule a consultation and learn how we can provide assistance with your case.