Mortgage fraud is a serious crime that carries with it some very serious penalties. And our lawyers focus on federal white collar crimes, like mortgage fraud, and other government investigations on a regular basis.
Below, we will discuss:
- The elements of mortgage fraud,
- Crimes relating to mortgage fraud,
- The penalties if convicted of committing mortgage fraud,
- Potential defenses to mortgage crimes.
If you have been charged with, or are under investigation for, mortgage fraud time is of the essence. Contact an experienced attorney today to ensure that your rights and interests are protected.
What is Mortgage Fraud?
Mortgage fraud is not explicitly defined in United States law. Instead it the expansion of statutes by congressional acts and the combination of statutes. There are several statutes you could be found guilty under for committing the act of mortgage fraud.
Below, are outlined the essential statutes that, on there own or in a combination, make up the crime of mortgage fraud.
Bank Fraud – 18 U.S.C. § 1344
Bank Fraud is the execution, or attempt to execute, any documents with the knowledge that they contain false information. It does so to defraud a financial institution or to gain an economic benefit or properties that are controlled by financial institutions. Bank fraud illegally deceives to gain money or property from a financial institution or a bank’s depositors.
In the aftermath of the mortgage crisis, Congress passed the Fraud Enforcement and Recovery Act of 2009 (FERA) which expanded the definition of a financial institution to include mortgage lending businesses.
FERA defined “mortgage lending businesses” as an organization that finances or refinances any debt that is secured by an interest in real estate. This includes any private companies, and their subsidiaries, whose activities affect interstate or foreign commerce.
In order to prove bank fraud, the government must prove these things:
- Knowledge – it must be proven that you knowingly provided false information to the financial institution in order to obtain money or other property. A simple mistake is not a crime under this statute.
- Execution, or attempt to execute – it must be shown that you executed the documents containing fraudulent information, or that you at the very least attempted to do so. Another person executing forms with false information, under your name, does not make you guilty.
- A Financial Institution – the false documents must be used or attempted to be used, at a financial institution as it is defined under the statute or FERA, described above.
False Statements – 18 U.S.C, §1014
The crime of false statements, in relation to mortgage fraud, is the making of false statements, knowingly, in order to influence the action of:
- a federal home loan bank,
- the Federal Housing Finance Agency,
- an organization that operated under sections 25 or 25(a) of the Federal Reserve Act,
- A mortgage lending business, or
- any entity or person who makes a federally related mortgage loan.
These false statements may also include the willful overvaluing of any land. And they must be made of any document, including but not limited to:
- purchase agreements,
- loan, or
- any change or extension of the above.
An example of a charge of false statements that may also qualify as mortgage fraud is the following. You purchase a house legally and without false statements on the loan application but with the intention to resell it at an artificially high price.
You immediately sell the home and hire an appraiser who will state the value of the house at a higher value than what it is truly worth. You use this value to sell the house and make extra money over that of your mortgage on the house.
You give a percentage of the profit from the sale to the appraiser and keep the rest for yourself – this is called illegal property flipping, and is considered a form of mortgage fraud underneath crimes of false statements. As with bank fraud, false statements must be made with your knowledge. A mistake as to a fact, or a written does not mean you have committed fraud.
Mail Fraud – 18 U.S.C. § 1341
Mail fraud, in the realm of mortgage fraud, is depositing into the flow of mail, whether it is carried by the United States Postal Service (USPS) or by a private carrier, or who knowingly causes to be delivered by mail or carrier anything that has been made to scam or gain money or property by false pretenses or to procure an obligation or security.
Wire Fraud – 18 U.S.C. § 1343
Wire fraud and mail fraud, above, are incredibly similar crimes.
Wire fraud, where mortgage fraud is concerned, is the use of, or causing the use of, wire, or other electronic means including radio or television or causing, in order to defraud or obtain money or property through false pretenses or promises.
Crimes Related to Mortgage Fraud
The crimes listed above have only one life being a means of getting a conviction for mortgage fraud; the crimes above also live lives of their own as separate crimes not dealing with mortgages.
Below are some additional crimes that are related to mortgage fraud:
- Tax Fraud
- Bankruptcy Fraud
- Identity Theft or Impersonations
- Bank Robbery
- Forged or Fraudulent Documents
- Fraudulent Loan Applications
- Money Laundering
Investigation of Mortgage Fraud and Enforcement
The investigations into mortgage fraud are commonly joint investigations shared between several federal government agencies.
These agencies include, but are not limited to:
- The Federal Bureau of Investigation (FBI)
- The Federal Trade Commission (FTC)
- The United States Postal Service (USPS)
- The United States Secret Service
- The Securities and Exchange Commission (SEC)
Penalties for Committing Mortgage Fraud
Below, the penalties for the crimes that make up mortgage fraud are listed individually. They all carry the same penalty for the attempt to defraud a financial institution. And while there are many statutory ways to commit mortgage fraud, the punishment is the same under all of them.
The penalties mentioned in the statutes, and below, are maximums. For judges to furnish a usable sentence, they use the Federal Sentencing Guidelines. The Federal Sentencing Guidelines provide a series of factors that judges should consider when coming up with an appropriate penalty following a guilty finding at trial. Those factors include, but are not limited to:
- Past criminal record
- Seriousness the crime
- Circumstance under which the crime was committed
- Role the defendant played in the crime
In addition to, or in lieu of, the fines outlined below a judge may also choose to impose a restitution penalty on the defendant. This means the defendant will have to pay a certain amount of money back to the victims. Restitution is aimed to aid victims of crimes who may not have the resources necessary to bring separate civil charges in order to get their money or property back.
Bank Fraud – 18 U.S.C. § 1344
If you are found guilty under the bank fraud statute, you face a fine of up to $1 million, up to 30 years in prison, or both.
False Statements – 18 U.S.C, §1014
If you are found to be making false statements, you face fines of up to $1 million, up to 30 years in prison, or both.
Mail Fraud – 18 U.S.C. § 1341
If you are found guilty of mortgage fraud under the mail fraud statute, you are subject to fines up to $1 million, a prison term of up to 30 years, or both.
Wire Fraud – 18 U.S.C. § 1343
If you are found to have committed mail fraud, against a financial institution – which is what makes it considered mortgage fraud – you could face up to $1 million in fines, up to 30 days in prison, or both.
Possible Defenses to Mortgage Fraud
In any case, civil or criminal, there is no single winning argument. Every case has different details that separate it from another case of the same charge.
It is the attention to these details that allows an experienced attorney to craft a personalized defense to your case in particular and most effectively defend you, your interests, and rights.
The following are examples of the most common defenses used in cases of mortgage fraud.
The knowledge of the falsity used when applying for a mortgage is a key element to every crime that makes up mortgage fraud. And If you have been charged with mortgage fraud based on an honest mistake of a fact, or a name spelling mistake, you most likely did not have knowledge of the mistake. Without knowledge of it, or the weight it carries, you cannot be convicted of fraud.
If you have been charged with mortgage fraud or are being investigated for mortgage fraud based on what you believe was an honest, unrealized mistake contact an attorney immediately.
A good attorney will be able to give proof of your honest mistake may be able to stop the investigation in its tracks or have the charges against you dropped because of this.
On a loan application, there is so much information that needs to be filled out. In many cases, some of the information is left to be filled out by a loan advisor.
Keeping a copy of your loan documents is important. If you have been charged with mortgage fraud, the loan application may be able to show that you were not the one to fill out the information that is fraudulent.
These loan documents could be key in showing that the investigating agency or prosecution has the wrong person and instead the loan officer may be the correct defendant.
Mortgage Fraud in the News
Mortgage Fraud Fugitive Back in U.S. – Houston Building Contractor Receives Additional Prison Time for Fleeing Prior to Sentencing
In June 2016, Oscar Cantalicio Ortiz, Houston based contractor, pled guilty to mortgage fraud. Then, released on bond, he fled prior to his scheduled sentencing in April 2017.
In absentia (in his absence), he received 22 years in prison, and was ordered to return $5.6 million. Acting in tandem with his Houston realtor, his scheme resulted in a $16 million disbursement in fraudulent loans, and an actual dollar loss of $5.4 million – thus, the amount of the court-ordered restitution.
The two recruited straw-buyers, using their names and good credit on loan applications to buy residential properties in Houston. They promised a buyer that the house would be bought, renovated, and sold shortly, and that the buyers would not need to worry about mortgage payments as they would take care of them.
The two then submitted the fraudulent loan applications, asking for up to 100% of the sales price of the property. To enhance the money they received, they submitted highly inflated appraisals of the houses to be purchased.
Ortiz and his partner never followed through on promised to the buyers to pay the mortgages which led to them going into default. An investigation into the defaults led to the ultimate arrest and charging of Ortiz of his partner. Ortiz’s partner was sentenced to 14 years in prison and was ordered to pay $5.4 million in restitution. Ortiz’s sentence may have been similar had he stayed.
Nine Sentenced in Multi-Million-Dollar Mortgage Fraud Scheme
All nine of those sentenced were a part of a large scheme to defraud and get money from financial institutions and various government agencies. Two scheme members purchased properties under general partnership names and then recruit straw-buyers – using their names to rebuy the same properties for higher amounts.
The repurchases were funded by fraudulent mortgages in the straw-buyer’s names. The defendants promised to pay the mortgage fees, expenses, and maintain the properties. The two major players in the scheme were charged as follows:
- The first was sentenced to 5 years in prison with 3 years of mandatory supervised release following his jail sentence. He was also ordered to pay$2,730,345 in forfeiture and $2,296,463 as a forfeiture money judgement.
- The second was sentenced to just over 3 years of prison with, upon his release, 3 years of mandatory supervised release. He was also ordered to pay $925,311 in restitution and $971,900 as a forfeiture money judgement.
Frequently Asked Questions
Who is most likely to commit mortgage fraud?
Accountants, mortgage brokers, and lenders are the most common suspect occupations when it comes to mortgage fraud investigations.
This is most likely due to the fact that they are in close proximity to the mortgage lending industry and have a greater knowledge of the mortgage lending process than others.
What Can I do if I am the victim of mortgage fraud?
First, and foremost, call an attorney. Being the victim of mortgage fraud can be complicated, and an experienced attorney will be able to get you your money or property back.
Second, talk to and cooperate with any investigators. The quicker their investigation is able to happen, the quicker you may be able to get the money or property back.
If you are the victim of mortgage fraud due to identity theft, file a credit report and make sure that no one compromised your identity in any other way.
Call a Federal White Collar Crime Attorney You Can Trust
Charges of mortgage fraud are serious and carry with them the potential of hefty fines and long jail sentences. A good attorney could change the rest of your life.
Our lawyers have defended private individuals and public companies. They will use their experience to ensure that you, your interests, and your family’s interests are protected.