Practice Area - Mortgage Fraud

Mortgage fraud describes a large variety of criminal actions. The unifying concept is the intent to misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender known the truth.

If you think that you may be under investigation or possibly facing criminal charges you are seriously advised to retain the services of an attorney.

In federal courts, mortgage fraud is prosecuted as wire fraud, bank fraud, mail fraud and money laundering, with penalties of up to thirty years imprisonment. See: http://www.usdoj.gov/usao/gan/press/2006/04-19-06b.pdf for an example of how a mortgage fraud prosecution works.

There are various forms that Mortgage Fraud can take. Income fraud and Fraud for Profit

Income fraud:

This term is used when a borrower overstates his income to qualify for a mortgage or for a larger loan amount. This was most often seen with so-called "stated income" mortgage loans (popularly referred to as "liar loans"), where the borrower, or a loan officer acting for a borrower with or without the borrower's knowledge, stated without verification the income needed to qualify for the loan. Because mortgage lenders have begun to tighten underwriting standards and "stated income" loans are less available, income fraud is increasingly seen in traditional full-documentation loans where the borrower forges or alters an employer-issued Form W-2, tax returns or bank account records to provide support for the inflated income. It is considered fraud because in most cases the borrower would not have qualified for the loan had the true income been disclosed. The real estate crises was caused, in part, when large numbers of borrowers in areas of rapidly increasing home prices misstated their income or occupation, purchased homes beyond their means, and then defaulted.

Fraud for profit:

Refers to a complex scheme that usually involves multiple parties. Indictments often include allegations against mortgage lending professionals. It is alleged that these individuals act in a financially motivated attempt to defraud the lender of money. Such schemes frequently include a straw borrower [someone who takes on a debt with no intention of repaying the debt?]whose credit report is used, a dishonest appraiser who intentionally and significantly overstates the value of the subject property, a dishonest settlement agent who might prepare two sets of HUD settlement statements, or makes disbursements from loan proceeds which are not disclosed on the settlement statement, and a property owner, all in a coordinated attempt to obtain an inappropriately large loan.

The summaries found on these pages are intended to give a broad picture of the types of criminal charges and are not intended as legal advice. The laws may have changed from the last update. For reliable information on state and criminal laws speak to an experienced criminal defense attorney about the facts of a specific case.

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