The 2008 financial crisis put a spotlight on mortgage fraud, causing the government to pass stricter requirements for obtaining a home loan and harsher penalties for white-collar crimes associated with money lending. Mortgage fraud is defined as any deceptive tactic used to buy a property or secure a better rate on the purchase of the real estate. While mortgage fraud can incur criminal charges, heavy fines, and jail time, a carefully strategized mortgage fraud defense can help you avoid conviction.
5 Examples of Mortgage Fraud
1. Misrepresenting the Buyer on the Mortgage Application
A buyer’s ability to secure a mortgage depends on several factors that are used to determine his or her financial health:
Additionally, appearing financially stable on the application gives buyers a better chance of obtaining a low-interest rate. A buyer who lies about any of the above criteria or a representative of the lender who helps a buyer falsify information could be guilty of mortgage fraud. For example, if your annual income is $50,000 and your state that it is $60,000 in order to purchase a property, you could be subjected to a mortgage fraud investigation.
2. Overestimating or Underestimating the Value of the Property
The amount of money one can secure from a mortgage depends on the value of the property. The reason for this is that the property can be used as collateral should the loan go into default. Sometimes, real estate listings overstate the value of the property so that the buyer can borrow more money from the lender. The practice of underestimating a property’s value is usually done to purchase foreclosures for less money than they are worth.
3. Treating a Loan as a Gift
When purchasing a home, one of the biggest obstacles for the buyer is often the down payment. Very commonly, the buyer’s family members will offer private loans to make affording the down payment easier. If the buyer claims that the loan was a gift, he or she misrepresents his or her assets, which could affect the terms of the mortgage he or she qualifies to secure.
4. Using Straw Buyers
There are many illegal schemes involving investment properties and straw buyers. In the context of mortgage fraud, a straw buyer is a person who purchases a home on behalf of an investor who would not qualify for the purchase himself or herself. One reason for using a straw buyer might be that the investor has loaned out on many other properties and carries a debt-to-income ratio that cannot support another mortgage.
5. Treating an Investment Property as a Primary Residence
When you purchase a home, you must state whether you intend to use it as your primary residence or whether you intend to resell it at a profit. Buyers are usually able to secure better rates on properties that are purchased as primary residences. Accordingly, a common type of mortgage fraud involves buyers who lie about their intended use of the property being purchased.
How to Prepare a Mortgage Fraud Defense
A high instance of mortgage fraud can cause general economic instability, which is why the federal government has become more aggressive about investigating deceptive home-buying practices and pressing charges. If you believe you are under investigation for mortgage fraud, you have the right to hire a white-collar crimes attorney who will fight the allegations. Depending on the details of your case, mortgage fraud attorneys in Houston can use the following defense strategies:
Showing That the Government Obtained Evidence Illegally
Government investigators are obligated to follow laws pertaining to how they gather evidence and build their cases. If law enforcement or federal agents coerced or persuaded you into committing fraud, your defense attorney can build your case around entrapment. Similarly, defense lawyers can sometimes argue that mortgage records were stolen or obtained without a warrant.
Demonstrating That You Did Not Act Knowingly
Making an error on a mortgage application is different from committing mortgage fraud. If your defense attorney can show that you gave false information unknowingly and without the intent to deceive, you cannot be convicted of mortgage fraud.
Proving That the Information You Gave Was Correct
In some cases, mortgage fraud attorneys are able to work with forensic accountants and other specialists to disprove the allegations that the information you reported was false. For example, if the prosecution claims that you over-reported your income, an accountant might be able to find documentation to show that the annual earnings you stated on your mortgage application were, in fact, accurate.
Mortgage fraud can take many forms, including falsifying information about the buyer’s financial health, intentionally giving inaccurate property appraisals, and engaging in investment property schemes. If you are under investigation for mortgage fraud or if you have been formally charged, working with a white-collar attorney can help you leverage strong defense tactics, such as disproving the charges or discrediting the evidence against you.