What are the Federal Laws on Mortgage Fraud?
The federal legal landscape concerning mortgage fraud is complex and layered. There isn't a single federal law that explicitly names mortgage fraud as a federal offense.
Instead, multiple laws collectively address various scenarios involving the act of defrauding or attempting to defraud a mortgage lender.
For example, 8 U.S.C. 1341 addresses mail fraud, and 18 U.S.C. 1343 pertains to wire fraud involving mortgages.
Furthermore, 18 U.S.C. 1344, which covers bank fraud, was broadened by the Fraud Enforcement and Recovery Act of 2009 (FERA) to include FDIC-insured banks, credit unions, federal home loan banks, and mortgage lenders.
Similarly, 18 U.S.C. 1014 makes it a crime to provide false statements to a financial institution, such as falsifying income, assets, debt, or identification information.
This federal law also forbids intentionally overvaluing land or property in a loan or credit application to influence the institution's decision.
Criminal Investigation
Criminal investigations into alleged bank fraud can last several years, depending on the scheme's complexity.
Given the serious implications and the possibility of indictment, it is vital to consult an experienced federal criminal defense lawyer immediately upon learning of the investigation. The stakes are high in mortgage fraud cases, so professional legal advice is crucial.
Mortgage fraud can entail various charges depending on the conduct involved. As noted above, making false statements during a mortgage application may also lead to charges such as mail fraud, wire fraud, or bank fraud.
Common schemes in mortgage fraud include foreclosure and resale scams, inflated appraisal schemes, air loans, and silent second schemes.
Individual schemes often include falsifying details on the borrower's application to secure a loan or obtaining inflated appraisals to favor the loan process.
Understanding Federal Mortgage Fraud
Mortgage fraud generally involves deceiving a lender into approving a mortgage loan that the borrower wouldn't normally qualify for.
It also includes mortgage and real estate fraud, which happens when someone submits false information on a loan application to acquire a property or funds, or to avoid foreclosure.
Mortgage fraud is a serious federal offense that generally involves submitting false information or withholding key facts to mislead lenders during the mortgage application process.
Title 18 U.S. Code 1014
This crime is commonly prosecuted under Title 18 U.S. Code 1014, which criminalizes the following actions:
- Provide false information to a financial institution.
- Provide misinformation to a financial institution.
- Property is overvalued in a loan application submitted to a federally insured financial institution.
This federal law encompasses various financial transactions, including mortgage applications, in which borrowers may submit false information to secure loans under pretenses. It also covers efforts to obtain credit and crop insurance.
In simple terms, knowingly providing false information to a federal agency or financial institution to obtain credit or insurance is a federal offense.
According to 18 U.S.C. 1014, it is illegal to deliberately make false statements or overvalue land, property, or securities to influence the decisions of federally insured institutions, including:
- Banks
- Credit unions
- Mortgage lending institutions
- Federal Housing Administration programs
What Factors Must Be Proven for a Conviction?
To convict someone of mortgage fraud, federal prosecutors need to demonstrate several elements of the crime beyond a reasonable doubt, including the following:
- The defendant provided false statements, submitted incorrect information, or overvalued property. This may include inflating property values, misrepresenting income or assets, or hiding debts.
- The defendant acted either knowingly or intentionally, meaning they were aware the information was false and purposely submitted it to deceive the lender.
- The false information was meant to sway the decision of a federally insured financial institution.
- The false statement was considered "material," indicating it was significant enough to influence the lender's decision. Minor miscalculations in the borrower's income are not seen as material, but grossly overstating earnings to obtain a loan definitely qualifies as material.
What are the Mortgage Fraud Penalties?
If you are convicted of violating 18 U.S.C. 1014, which pertains to making false statements on loan and credit applications related to mortgage fraud, you could face both criminal penalties and financial consequences, such as the following:
- Imprisonment for up to 30 years in federal prison.
- Fines can reach up to $1,000,000.
- Compensation provided to fraud victims for their monetary damages.
Federal sentencing for mortgage fraud offenses will take into account factors such as the amount of money involved, the defendant's role in the fraud, and any prior criminal record.
The Federal Sentencing Guidelines provide judges with a framework for determining an appropriate sentence. Still, they also allow judges to depart from the guidelines in light of the particular circumstances of each case.
What are the Possible Defense Strategies?
Suppose you face a mortgage fraud accusation. A federal criminal defense lawyer can employ various strategies to counter the prosecution's case.
One approach might be to demonstrate a lack of intent. A key element to establish is that you acted "knowingly" or "willfully."
Showing that any false statements were made unintentionally or without the intent to deceive could undermine the prosecution's case.
You could argue that you acted in good faith, genuinely believing the information was true. Alternatively, you might claim you relied on incorrect data from a third party, like an appraiser or accountant.
Essentially, it could be possible to assert that you did not intentionally commit fraud. You might claim that someone else involved in the transaction pressured you into providing false information.
Federal pretrial diversion is a discretionary program that lets some accused of federal crimes avoid prosecution by completing supervision and compliance.
For further details, reach out to our federal criminal defense law firm, Eisner Gorin LLP, in Los Angeles.
If you have one phone call from jail, call us! If you are facing criminal charges,