The banking and mortgage industry is one of the most heavily regulated industries in America. As a result, there are many activities which are made crimes under both United States and Michigan law. If you are being investigated for mortgage fraud, now is the time to act. You should immediately contact the criminal defense team at The Kronzek Firm PLC. We offer free consultations and expert defense. Call (866) 766-5245.
What is Mortgage Fraud?
Mortgage Fraud is a vast and complex topic. However, this article serves as a brief overview. There is no one federal statute prohibiting mortgage fraud—but instead the government has an extensive array of applicable statutory tools to combat fraud.
This offense employs some kind of misrepresentation or omission related to a real estate transaction that is relied upon by one or more of the transaction participants.
Some common types include the following, and much more:
- Loan modification scams: This may involve fake government modification programs, offers over the phone to negotiate with a lender on one’s behalf for an up-front fee, etc.
- Foreclosure rescue: Individuals approach homeowners that are facing foreclosure and promise to stop the event through deed transfers and fees paid up front. Often foreclosure is only delayed.
- Illegal property flipping: Buying property at a low price, getting it falsely appraised, and then swiftly reselling at a higher price. This artificially inflated property value allows a purchaser to get a bigger loan than is otherwise possible. Then the purchaser pockets the difference.
- Builder bailout/condo conversion: Builders are offsetting high debt and losses in poor home sales markets.
- Equity skimming: Type of scam where an offender steals the equity from a property through investments or refinancing.
- Home equity conversion mortgage/Reverse mortgage: Usually equity is stolen from the property of unsuspecting senior citizens.
- Silent second: A second mortgage not disclosed to the primary lender often used to hide the fact that the home buyer has borrowed the down payment.
- Air loans: Approved financing based nearly entirely on fake information, including borrowers’ identities, pay stubs, bank statements, tax returns, etc.
- Commercial Real Estate Loan Fraud: These mirror the types of fraud in the residential mortgage market.
The government has many options in charging individuals regarding these crimes.
Mail Fraud and Wire Fraud
The mail fraud and the wire fraud statutes cover a wide range of fraudulent activities. The government must prove (a) use of either mail or wire communications in the foreseeable furtherance (b) of a scheme to defraud (c) involving a material deception (d) with intent to deprive another of (e) either honest services or property.
Both have a maximum penalty of 20 years in prison, a fine up to $250,000 (up to $500,000 for organizations) —or a fine up to $1,000,000 and up to 30 years in prison if the victim is a financial institution or the crime was committed in connection with a natural disaster.
Bank Fraud
This is where an individual knowingly commits or attempts to commit a scheme to defraud a financial institution or to obtain money, assets, property, etc. by false or fraudulent means.
For a charge under the bank fraud statute to result, a financial institution must be the victim of the fraud. If the financial institution is involved in the fraud, this law would not apply. Such institutions include FDIC-insured banks, credit unions, mortgage lending businesses, and more.
The maximum penalty is 30 years in prison, up to a $1,000,000 fine, or both.
Interstate Transportation of Funds Obtained by Fraud (ITSP)
This imposes criminal liability for interstate transportation of funds obtained by fraud or of stolen property. The property taken or the money gained in the fraud must have a value of $5,000 or more; however, this threshold is easily met in a mortgage fraud case. The defendant must know the property was taken by fraud.
The maximum penalty is 10 years in prison, fines, or both.
False Loan or Credit Applications to a Financial Institution
This prohibits knowingly making any false statement or report, willfully overvaluing land, property, or securities for the purpose of influencing the decision making of financial institutions.
The maximum penalty is 30 years in prison, up to a $1,000,000 fine, or both.
Money Laundering
This is the process of taking the proceeds of illegal activities and funneling them through legitimate accounts and entities to make the earnings appear legal—or to use the funds to promote the continuance of specified unlawful activities.
The maximum penalty is up to 20 years in prison, a fine up to $500,000, or twice the value of the property involved in the transaction, whichever is greater, or both. The civil penalty is not more than the greater of the value of the property, funds, or monetary instruments involved or $10,000.
Knowingly engaging or attempting to engage in a monetary transaction with criminally derived property that is valued greater than $10,000 and gained from specified unlawful activity is prohibited.
The maximum penalty is up to 10 years in prison, a fine, or both. The court may impose a fine up to twice the amount of the criminally-obtained property that is involved.
Conspiracy to Defraud
Conspiracy is an agreement between individuals to work in concert to defraud or commit an offense against the government. In federal cases, an overt act committed in furtherance of the conspiracy is required.
The maximum penalty is up to 5 years in prison, a fine, or both.
Another statute applies to bank, mail, and wire fraud. No overt acts are required in these cases.
The maximum penalty is the same as for the underlying fraud, so either 20 or 30 years imprisonment.
Other Potential Related Charges
Additionally, other possible charges exist as well:
- False statements to a government agency or agent;
- HUD and Federal Housing Administration (FHA) fraud;
- Identity theft and aggravated identity theft;
- Use of a false name or address in mailings;
- Use of a false Social Security number.
Civil Penalties
The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) was enacted after the savings and loan crisis of the eighties in order to punish and deter fraud committed against financial institutions.
The maximum civil penalty in applicable cases is $1,000,000. Regarding ongoing violations, the maximum penalty increases to $1,000,000 per day, or $5,000,000, whichever is less. Yet, if there is a gain to the violator or a loss to another, these maximum penalties increase to the amount of the gain or loss, whichever ends up being greater.
Certain criminal statutory violations trigger civil penalties accessible under FIRREA. Two examples that apply in most mortgage fraud cases are false loan or credit applications and bank fraud. However, many more financial crimes are covered as well.
Contact Us Today
Many factors affect how individuals are charged and sentenced in relation to these offenses. Restitution would also apply in fraud cases.
If you have been charged with a financial crime, the aggressive and experienced trial lawyers at The Kronzek Firm PLC, are available to assist you. We offer a free case evaluation at (866) 7-NoJail to those considering retaining our services.
Call Toll Free (866) 766-5245