Strategic Federal And State Criminal Defense

Understanding mortgage fraud

On Behalf of | Nov 16, 2021 | Federal Crimes |

When the housing market is doing well, it can be tempting to do everything in your power to secure the house of your dreams. However, it is important to still operate carefully within the confines of the law. Accusations of mortgage fraud can easily derail your future, so you should avoid taking any action that might lead to such allegations.

It is important to note that you can still face a mortgage fraud charge even if you believe that you inadvertently provided incorrect documents or information. The process for securing a mortgage can be rigorous, and it is easy to make mistakes. Here are a few things to keep an eye out for when hoping to avoid accusations of fraud.

Categories of mortgage fraud

There are two main categories of mortgage fraud. The first is fraud for housing, which pertains to fraudulent actions taken when buying a home. The second is fraud for profit, which involves fraudulent actions taken in an effort to extract money from a transaction or property. Examples of mortgage fraud that can be either for housing or profit include:

  • Supplying fraudulent supporting documentation
  • Failing to disclose a “silent second” mortgage
  • Using a stolen identity

Another form of mortgage fraud involves using a straw buyer. This is when the actual buyer hides his or her identity behind that of a nominee. The nominee’s name and credit history would appear on the loan application despite not being the intended buyer.

Watch out for price and value

Real estate is one of the largest investments that most people in California will ever make. It is understandable that homeowners want to get the best possible profit margin when selling a property, but this should occur in a legal and ethical way. One method to avoid is using an inflated appraisal, which is when a homebuyer colludes with another party to create an exceptionally high appraisal value.

Property flipping is another potential problematic area. This occurs when someone purchases a piece of real estate, promptly appraises it at a falsely higher value and then quickly puts it back on the market. Property flipping in the middle of a housing boom might not necessarily be illegal, but it certainly walks a fine line and is often best avoided.

Minimizing potential consequences

California is one of approximately 33% of U.S. states that have state laws prohibiting mortgage fraud. This means that, if authorities accuse you of committing fraud, you could possibly face both state and federal charges. These charges can range from misdemeanors to felonies.

Having mortgage fraud show up on your criminal record can negatively impact your future. In addition to spending time in jail and paying fines, a conviction will likely also limit your future employment and educational options. Minimizing these types of legal and personal consequences should be a priority, so you should take the time to learn as much as possible about the charges against you.