California's criminal law provisions address fraudulent conduct which occurs during the real estate transaction and mortgage loan acquisition process in a number of overlapping ways. Real estate fraud occurs when someone commits fraud that is connected to the purchase, sale, rental or financing of real estate property.
Real estate fraud laws cover a wide range criminal conduct that involves housing, rental agreements, mortgages, and foreclosures. This form of criminal fraud typically results in significant financial losses and prosecutors will aggressively pursue credible allegations.
Anyone who is convicted of the white collar crime of real estate fraud will facing severe penalties, including state prison time, large fines, and restitution.
There are many different statutes for real estate fraud, such as grand theft under California Penal Code 487. If the prosecutor charges someone with grand theft in the context of real estate fraud, they will have to prove certain factors to obtain a conviction.
These factors include showing the defendant intentionally deceived the property owner by making a false claim or representation, and the act was with the intent the property owner allowed them to take ownership of the property based on the false representation.
Grand theft, foreclosure fraud and other forms of real estate fraud are typically a California “wobbler” offense that can be charged as either a misdemeanor or felony crime. A conviction will normally require a defendant to pay restitution to the victim.
To give readers more useful information about real estate and mortgage fraud, our Los Angeles criminal defense lawyers are providing a review below.
Grand Theft – Penal Code 487
When a debtor falls into default and a foreclosure process is marred by fraud, this can also give rise to a prosecution for real estate fraud.
The general grand theft prohibition in Penal Code Section 487 is often used in real estate fraud cases. In the grand theft context, a real estate or mortgage fraud allegation is usually a flavor of theft by false pretenses.
A criminal defendant violates Penal Code Section 487 when they defraud another person out of money or property, including real estate, by way of false representations or promises.
Real estate and/or mortgage fraud can occur under this section when the defendant makes false statements or promises to either a buyer or seller with the intent that the other party is misled and thereby gives the defendant something of value to which they would not otherwise be entitled.
This could include lying about the ownership of a piece of property during the sales process, concealing defects with the property, etc.
There are several other more specific provisions that apply to real estate fraud. These include foreclosure fraud in violation of California Civil Code Section 2945.4, rent skimming as prohibited by Civil Code Section 890, presentation of forged documents as prohibited under California Penal Code Section 115, and forgery under Penal Code 470.
Foreclosure Fraud - Civil Code 2945.4
Foreclosure fraud under Civil Code 2945.4 became a prevalent problem following the 2008 great recession when many homeowners were facing possible foreclosure and the loss of their homes.
A number of disreputable businesses opened under the auspices of assisting homeowners with navigating the foreclosure process.
In fact, these businesses would charge excessive fees, improperly take an interest in the ownership of the property subject to foreclosure, or otherwise defraud the already desperate homeowners. This conduct is also criminally punishable under California's real estate and mortgage fraud laws.
Rent Skimming – Civil Code 890
Rent skimming is another form of real estate fraud. In this scenario, a defendant either fails to apply rent payments collected during the first year of ownership of a residential property to the mortgage on that property or deceives a renter into believing the defendant is in fact an authorized owner.
In some cases, defendants pretend to own a piece of property and collect rents on it when they in fact do not have an ownership interest in the residential property.
Filing Forged Documents – Penal Code 115
Penal Code Section 115 prohibits filing of forged documents. In the real estate or mortgage fraud context, this could involve filing a forged deed with the county recorder to deceive the government or other private parties as to the ownership of a piece of real estate.
This could also include forging mortgage loan contracts, real estate sale contracts, disclosure forms concerning defects with the property, or any number of other important real estate transaction documents.
Filing these documents, which must usually be done under penalty of perjury, is a criminal offense under California's laws in addition to giving rise to substantial civil liability.
The penalties associated with each of these unlawful actions vary depending on the seriousness of the offense and the defendant's prior criminal history. Particularly in the case of forgery, real estate and mortgage fraud can be a felony crime which is punishable by incarceration in the state prison.
As stated, real estate fraud charges are “wobblers” that can be charged as either a misdemeanor or felony crime.
Fighting Real Estate Fraud Charges
Defenses to accusations of real estate and/or mortgage fraud under California's criminal laws will vary from case to case, but as with all fraud charges the issue of the defendant's intent will be paramount.
Parties in real estate transactions often negotiate aggressively and seek to gain an advantage in the transaction. In the criminal law context, the defendant may argue that the alleged victim was not defrauded or deceived, but was simply unhappy with the result of the transaction after the fact.
Documentation of actual, material, misrepresentations by the defendant is generally necessary to sustain a charge of real estate or mortgage fraud. Real estate and mortgage fraud are serious criminal charges under California law.
If you, or someone you know, is under investigation for, has been arrested for, or is already charged with real estate or mortgage fraud in California state court, contact our experienced team of Los Angeles criminal defense attorneys for an initial consultation.
Through a prefiling intervention, it may be possible to drop or reduce charges before your case proceeds to court. Effective representation by experienced defense counsel is crucial to maximizing the chances of a successful outcome in your case.
Eisner Gorin LLP is a top-ranked criminal defense law firm located at 1875 Century Park E #705, Los Angeles, CA 90067. Contact our office to review the details of your case at (310) 328-3776.