When we think of fraud, we often think of the big accounting scandals that plague the modern era: Bernie Madoff's Ponzi scheme, Lehmen Brother's "too big to fail" lies, and Enron's shady bankruptcy. Mortgage fraud is a growing problem that costs taxpayers money and cripples the national economy. Unfortunately, the real estate and economic crisis of the early 2000s led to many mortgage fraud schemes, and now the government is zealously investigating and prosecuting individuals and companies for crossing the line.
Mortgage Fraud: A Primer
Mortgage fraud refers to an action in which someone misrepresents, fabricates, or omits information on a mortgage application. Essentially, if you lie on your mortgage loan application, you commit fraud. Most criminal mortgage fraud cases do not involve simple errors of omission. If you forget to add a trivial detail about your credit history, you will likely be safe from draconian penalties, like jail time and steep fines. The kinds of mortgage fraud that the government typically prosecutes are more involved and complex, such as:
In the wake of the 2008 subprime loan crisis, homeowners scrambled to keep their mortgages up-to-date, despite the fact that most owed more on their homes than those homes were worth. In response, "foreclosure rescuing" became more commonplace. In this scenario, perpetrators convince homeowners they can transfer the deeds of their homes to an investor and rent from them until their credit history gets reestablished. Unfortunately, homes usually go into foreclosure before this happens.
If a company contacts you and tells you it can renegotiate the terms of your mortgage with your lender, be wary. The supposed knights in shining armor might charge you exorbitant or illegal fees in exchange for their services. In some cases, perpetrators simply pocket the cash and take off, leaving homeowners to deal with foreclosure.
Illegal property flipping isn't to be confused with legitimate flipping, in which an investor buys a fixer-upper, invests in serious modifications, and sells the home for a profit. What distinguishes legal property flipping from illegal flipping is appraisal value. In an illegal scenario, a property is falsely appraised at a value much higher than fair market value. This kind of mortgage fraud usually involves falsified appraisals, fraudulent loan documentation, or kickbacks to other parties involved.
Mortgage fraud has many faces; these are simply the most common. To protect yourself from fraud, exercise good judgment.
If you stand accused of fraud, or you're under investigation, be aware that the government takes these charges very seriously. To protect yourself and your business from steep fines and to ensure your freedom, retain an experienced criminal defense attorney who understands how to construct effective responses to your type of charge. Call our legal team to arrange a private consultation.