Mortgage Fraud

MORTGAGE FRAUD SCHEMES

Conspiracy to Commit Fraud │ Bank Fraud │ Aggravated Identity Theft │ Email Fraud │ Computer Fraud │ Credit Card Fraud

With the collapse of the residential real estate market in the late 2000s came a great deal of foreclosure activity, along with a tremendous increase in criminal prosecutions for fraud connected to real estate transactions. Fraudulent activity associated with residential real estate transactions is known as “mortgage fraud.” While mortgage fraud prosecutions are largely in federal court, a number of state prosecutions through local district attorneys’ offices are also occurring.

Mortgage Fraud Schemes

The phrase “mortgage fraud” is a broad definition for different types of fraudulent schemes used to obtain monies from residential real estate closings. Often, the alleged schemes will involve misrepresentations of fact to create false credit or equity that is drawn upon when a sale or re-sale of the property occurs.

Mortgage fraud prosecutions include cases of real estate sales of falsely inflated property values, referred to as “flipping” the property. However, there are a variety of mortgage fraud schemes, such as:

1. Seller Pay – Seller paying the down payment and closing costs without disclosing this to the lender.
2. Builder Incentives – Builders who need to sell new homes offer monies back or incentives that are not disclosed on the settlement statement.
3. Straw Borrower/Short Sale – Purchaser in name only or a “straw borrower” is used to purchase the property then default on the loan, which causes the lender to short sell the property to get rid of it. The schemer then purchases the property at a below-market rate.
4. Seller Rescue/Seller Assist – Persons or companies advertise help to sell the property, when they use falsely inflated appraisals and or straw borrowers.
Persons involved in mortgage fraud schemes are frequently prosecuted in mass in federal court for criminal offenses of bank fraud, false statements to a financial institution, mail fraud, wire fraud, money laundering and insurance fraud. Many of the same charges utilized for indictments in the “bank fraud prosecutions” are now being used to prosecute persons for “mortgage fraud” related to residential real estate.

Federal Court Prosecutions of Mortgage Fraud

Traditionally, the charges used to prosecute mortgage fraud are mail fraud, bank fraud, wire fraud and money laundering. Although commonly used for drug trafficking indictments, the charge of conspiracy is also used by federal prosecutors to charge persons with mortgage fraud crimes. Some district attorney’s offices that prosecute mortgage fraud in state court will charge the defendants with engaging in organized criminal activity (similar to conspiracy in federal court), theft or obtaining property or credit by fraudulent representations.

Further Statutes to Prosecute Mortgage Fraud in Federal Court

Additional statutes to prosecute other forms of fraud in real estate transactions in federal court include:

1. Conspiracy to commit fraud (Title 18, U.S. Code, Section 1349);
2. Unauthorized access to a computer, or communications (Title 18, U.S. Code, Sections 1037, 2701);
3. Computer fraud (Title 18, U.S. Code, Section 1030);
4. Email fraud (Title 18, U.S. Code, Section 1037);
5. Aggravated identity theft (Title 18, U.S. Code, Section 1028A);
6. Credit card fraud (in connection with access devices) (Title 18, U.S. Code, Section 1029).
Charges Customarily Used for Federal Criminal Prosecutions of Mortgage Fraud

Bank Fraud

Title 18, U.S. Code, Section 1344 reads:

Whoever knowingly executes, or attempts to execute, a scheme or artifice—

to defraud a financial institution; or
to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody of or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned for more than 30 years, or both.

False Statements to a Financial Institution

Title 18, United States Code, Section 1014 reads:

Whoever knowingly

Makes a false statement, or overvalues any property
For the purpose of influencing an anyway
The action of a financial institution
shall be fined not more than $1,000,000 or imprisoned for more than 30 years, or both.

Conspiracy to Commit Fraud

Title 18, U.S. Code, Section 1349 reads:

Attempt or Conspiracy to Commit Fraud

Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.

Call the Dallas, Texas Law Office of John R. Teakell

If you are charged with mortgage fraud in state or federal courts, seeking legal counsel at the outset is crucial. Call the Law Offices of John R. Teakell at (214) 523-9076 to arrange a confidential consultation with an accomplished attorney known for his legal expertise. Criminal defense attorney, John Teakell has been named among the Top 100 Trial Attorneys in Texas by the American Trial Attorneys and as Texas Super Lawyer for his work in criminal defense and stands ready to put his knowledge to work for you.