For many people, the term mortgage fraud inspires thoughts of financial industry insiders engaging in some kind of misconduct. For example, a broker might recommend that a client inflate their income or even alter certain paperwork before submitting it for underwriting consideration. The goal is often to assist as many people as possible with securing mortgages, even if applicants likely shouldn't qualify for one. Mortgage fraud committed on a for-profit basis often involves someone who works in the real estate industry and it can cost financial institutions hundreds of thousands of dollars per case. Still, there is another form of mortgage fraud that is also quite common. Many people do not realize that a large number of mortgage fraud cases every year actually involve mortgage fraud committed for housing purposes. This form of fraud is committed by prospective buyers. Instead of a professional engaging in fraud for financial gain, a homeowner misrepresents their situation on paper to secure financing for a home.
What constitutes mortgage fraud?
Any attempt to misrepresent your circumstances to a lender could result in mortgage fraud charges. Oftentimes, people provide inaccurate information about themselves or about property that they want to buy in the hopes of securing a mortgage. For example, people might arrange for a friend to serve as a stand-in for their employer to help validate claims of a recent raise that a borrower fabricated. They know that they don't make enough to qualify for the loan they need, so they create a realistic scenario in which the last year's wages don't reflect a higher wage that they – allegedly – earn currently. Other times, it may be a misrepresentation of someone's other financial obligations that lead to claims of buyer mortgage fraud. If a lender discovers the lies on mortgage paperwork, they could potentially push for prosecution of the applicant. Cases that involve default and foreclosure are far more likely to result in mortgage fraud prosecution than in cases where people fastidiously adhere to the terms of their mortgage.
What charges could mean for you
An accusation of mortgage fraud could lead to criminal prosecution, possibly at the federal level. The penalties that you’d face could include up to 20 years in prison and $500,000 in fines. The type of fraud and the circumstances that led to its discovery will play a major role in how you’d need to develop your defense strategy and what penalties you’d face. Fighting back against white-collar criminal charges often requires careful preparation and an understanding of the law. If you’re facing charges already, it’s time to research your legal rights and to seek professional guidance.