Let’s Take A Closer Look at Mortgage Fraud
Most borrowers think that overstating your income or net worth on a mortgage application may constitute mortgage fraud but that the typical borrower who does so is merely “stretching” the truth to qualify for a mortgage to purchase real estate otherwise beyond their reach. This belief may have some validity but systemic mortgage fraud Is another matter altogether.
False Statements (18 U.S.C. § 1014)
Title 18 Section 1014, United States Code, criminalizes “the knowing making of false statements or willfully overvaluing any property or security to influence in any way the action of the itemized agencies and organizations. “
There is no specific statute that defines mortgage fraud per se. A mortgage fraud scheme involves some form of material misstatement, misrepresentation, or omission on which the lender or underwriter of the funding, purchase, or insuring of a loan relies upon in reaching a decision.
But mortgage fraud schemes goes far beyond the mere falsification of information on a mortgage application; they have evolved into a very sophisticated industry that uses the latest technologies to drive these crimes, costing organizations millions of dollars annually.
Mortgage fraud is analogous to committing bank robbery without a weapon. As we saw during the financial collapse in 2007 and 2008, fraudulently acquired real estate may trigger a downward spiral of financial ruination. Properties acquired in fraudulent for-profit schemes typically result in widespread vacancy, pillaging and worse. The perpetrator of mortgage fraud may also engage in insurance fraud by filing a false claim after his or her degraded property is purposely damaged or destroyed.
The Scope of Mortgage Fraud
Depending on the nature of a particular scheme, the federal courts prosecute mortgage fraud schemes as:
- Aggravated identity theft
- Bank fraud
- Bankruptcy fraud
- Conspiracy to commit bank fraud
- Mail fraud
- Money laundering
- Wire fraud
- …and/or false statements
Although the scope of fraudulent mortgage schemes is infinite, they are classified as either fraud-for-profit or fraud-for housing and are charged by most states courts Grand Larceny.
- Compounding the problem, an increasing number of borrowers prepare false tax returns that fraudulently overstate taxable income to qualify for a mortgage or to refinance an existing loan.
- Underwriters have become reliant on automated underwriting tools as a substitute for due diligence and critical analysis which are incapable of detecting fraud.
- Mortgage fraud in connection with low-income H.U.D. housing grants is on the rise; career fraudsters snap up federally-subsidized properties in foreclosed housing stock, eventually recycling the properties into new fraud schemes.
- Supported by the overstock of foreclosed properties held by the FDIC and banks, investors purchase these properties in bulk and then sell them to unwitting end buyers at drastically inflated prices.
- Mortgage fraud through reverse mortgages is another venue for fraudsters.
Penalties and Fines
The bottom line is that mortgage fraud is a Federal Crime punishable by up to 30 years in prison and up to a one million dollar fine pursuant to 18 United States Code 1014
If you or someone you know finds themselves implicated in mortgage fraud charges, you need The Law Office of Richard S. Berne. We are uniquely qualified to effectively represent individuals in a wide range of white-collar criminal investigations and charges and as well as in civil litigation in Maine, Massachusetts, and New York state and federal courts. Richard S. Berne has over 45 years of legal experience which ensures you the best criminal defense. Call today for your FREE case evaluation