What Is Mortgage Fraud
Federal Mortgage Fraud Statutes
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Mortgage Fraud Charges
Mortgage Fraud is a white-collar federal crime involving real estate transactions, property, loans and mortgages. Mortgage fraud occurs when someone lies, confuses, or intentionally omits important information during the mortgage application and approval process. Mortgage fraud is possible through a single act by either a lender or a borrower.
It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender. A lie that influences a bank’s decision—about whether, for example, to approve a loan, accept a reduced payoff amount, or agree to certain repayment terms—is mortgage fraud. The FBI and other entities charged with investigating mortgage fraud, particularly in the wake of the housing market collapse, have broadened the definition to include frauds targeting distressed homeowners.
Mortgage Fraud Cases
The Federal Bureau of Investigation (FBI) investigates Mortgage Fraud and characterizes it as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.
One of the most common kinds of financial institution fraud involves loan or mortgage application fraud. During the last decade, many bank and mortgage company officials orally encouraged individuals and businesses to misrepresent their income and other factors on mortgage applications. When these borrowers don’t make their payments, the banks review the applications, looking for misstatements of income or other misrepresentations of fact. If the banks find anything, they will often turn the case over to the feds for prosecution. In essence, the banks and mortgage lenders are trying to use the government as a collection agency, to collect on bad loans they encouraged people to take.
Most Mortgage Frauds involve borrowers trying to defraud a lender by obtaining loans they wouldn’t legitimately qualify for. Mortgage Fraud schemes include borrower’s providing phony documents to banks. Phony documents include, appraisals, paycheck stubs and bogus tax returns with the help of corrupt bankers, escrow officers, mortgage brokers and realtors.Banks are usually the victims in Mortgage Frauds, because when a borrower lacks income to pay the loan, the property may possibly go into a foreclosure causing the bank to lose large sums of money.
Mortgage Fraud Penalties
Unlike other Federal crimes, Mortgage Fraud lacks criminal statutes of its own. Due to the complexity of Mortgage Fraud, defendants are usually charged under existing Bank, Mail or Wire Fraud statutes and defendants are subject to the penalties in those crimes.
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