Federal law does not contain a specific statute aimed covering mortgage fraud. There are a number of laws that cover situations involving defrauding or attempting to defraud a mortgage lender.
For example, the mail fraud statute, 18 U.S.C. § 1341, and the wire fraud statute, 18 U.S.C. § 1343, cover fraudulent activity that could occur in relation to a mortgage. Further, the bank fraud statute, 18 U.S.C. § 1344 has been expanded under the Fraud Enforcement and Recovery Act of 2009 (FERA), to not only include FDIC-insured institutions, credit unions, federal home loan banks, but mortgage lending businesses. Further, under 18 U.S.C. § 1014, prohibits false statements to a financial institution, such as providing false information regarding income, assets, debt, or matters of identification, or to willfully overvalue any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution.
When is Best Time to Act?
Investigations by the authorities uncovering acts of bank fraud can take years to conclude depending on the complexity of the scheme involved and the behavior of those involved. Due to the lengthy nature of the investigations that can lead to an indictment it is important to seek experienced counsel as soon as you become aware that you could potentially be subject of the investigation and/or are under threat of indictment.
Types of Crimes/Charges
Acts of mortgage fraud involve a number of charges depending on the conduct involved. When an individual makes false statements in relation to a mortgage application, charges may also include mail fraud, wire fraud, or bank fraud.
Mortgage Fraud Criminal Schemes
Mortgage fraud can involve a number of schemes to defraud the lender, such as silent second schemes, foreclosure and resale schemes, inflated appraisal schemes and air loans schemes. Individual schemes often involve falsifying information on the borrower’s application to obtain a loan or obtaining inflated appraisals to obtain favorable loans.
Related Crimes
Some of the applicable Federal criminal statutes that may be charged in connection with Mortgage Fraud include:
- 18 U.S.C. § 1001 – Statements or entries generally
- 18 U.S.C. § 1010 – HUD and Federal Housing Administration Transactions
- 18 U.S.C. § 1014 – Loan and credit applications generally
- 18 U.S.C. § 1028 – Fraud and related activity in connection with identification documents
- 18 U.S.C. § 1341 – Frauds and swindles by Mail
- 18 U.S.C. § 1342 – Fictitious name or address
- 18 U.S.C. § 1343 – Fraud by wire
- 18 U.S.C. § 1344 – Bank Fraud
- 42 U.S.C. § 408(a) – False Social Security Number
Regulations/Legislation
Under 18 U.S.C. § 1014 the offense of making a false statement include:
- Making a false statement or willfully overvaluing property or security knowing the same to be false,
- for the purpose of influencing in any way the action,
- of the enumerated agencies and organizations.
Actual damage or reliance is not an essential element of the offense.
Penalties & Punishment
Mortgage Fraud is punishable by up to 30 years in federal prison or $1,000,000 fine, or both.
Successful Defense
As in many over criminal cases attacking the mens rea element of the crime provides a method of overcoming a charge of mortgage fraud. For example, the false statement statute requires that a defendant knowingly makes a false statement to influence an action by the lender. If the Defendant was not aware that the statements being made were false or were not made to influence the action of a lender the prosecution may not meet its burden of proof.
Differences between State & Federal Charges
S 187.00 Definitions. As used in this article:
- “Person” means any individual or entity.
- “Residential mortgage loan” means a loan or agreement to extend credit, including the renewal, refinancing or modification of any such loan, made to a person, which loan is primarily secured by either a mortgage, deed of trust, or other lien upon any interest in residential real property or any certificate of stock or other evidence of ownership in, and a proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of residential real property.
- “Residential real property” means real property improved by a one-to-four family dwelling, or a residential unit in a building including units owned as condominiums or on a cooperative basis, used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons, but shall not refer to unimproved real property upon which such dwellings are to be constructed.
- “Residential mortgage fraud” is committed by a person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be used in soliciting an applicant for, applying for, underwriting or closing a residential mortgage loan, or filing with a county clerk of any county in the state arising out of and related to the closing of a residential mortgage loan, any written statement which:
- contains materially false information concerning any fact material thereto; or
- conceals, for the purpose of misleading, information concerning any fact material thereto.
S 187.01 Limitation on prosecution. No individual who applies for a residential mortgage loan and intends to occupy such residential property which such mortgage secures shall be held liable under this article provided, however, any such individual who acts as an accessory to an individual or entity in committing any crime defined in this article may be charged as an accessory to such crime.
S 187.05 Residential mortgage fraud in the fifth degree. A person is guilty of residential mortgage fraud in the fifth degree when he or she commits residential mortgage fraud. Residential mortgage fraud in the fifth degree is a class A misdemeanor.
S 187.10 Residential mortgage fraud in the fourth degree. A person is guilty of residential mortgage fraud in the fourth degree when he or she commits residential mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of one thousand dollars. Residential mortgage fraud in the fourth degree is a class E felony.
S 187.15 Residential mortgage fraud in the third degree. A person is guilty of residential mortgage fraud in the third degree when he or she commits residential mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of three thousand dollars. Residential mortgage fraud in the third degree is a class D felony.
S 187.20 Residential mortgage fraud in the second degree. A person is guilty of residential mortgage fraud in the second degree when he or she commits residential mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of fifty thousand dollars. Residential mortgage fraud in the second degree is a class C felony.
S 187.25 Residential mortgage fraud in the first degree. A person is guilty of residential mortgage fraud in the first degree when he or she commits residential mortgage fraud and thereby receives proceeds or any other funds in the aggregate in excess of one million dollars. Residential mortgage fraud in the first degree is a class B felony.
High Profile Cases
Cases of fraud by borrowers are often not considered high profile However, when this conduct involves large lenders who commit fraud to profit from the transaction, these cases often involve schemes involving mortgage brokers, real estate appraisers, agents and bankers.
As a legal expert specializing in white-collar crimes, particularly mortgage fraud, I bring forth a wealth of knowledge and firsthand experience in the intricacies of federal laws governing such offenses. My expertise stems from years of practice and a comprehensive understanding of the legal landscape surrounding mortgage fraud cases.
Now, let's delve into the concepts outlined in the provided article:
Federal Laws Covering Mortgage Fraud
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Mail Fraud (18 U.S.C. § 1341) and Wire Fraud (18 U.S.C. § 1343):
- Both statutes cover fraudulent activities related to mortgages that involve the use of mail or electronic communications.
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Bank Fraud (18 U.S.C. § 1344):
- The Fraud Enforcement and Recovery Act of 2009 expanded this statute to include mortgage lending businesses, FDIC-insured institutions, credit unions, and federal home loan banks.
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False Statements to Financial Institutions (18 U.S.C. § 1014):
- Prohibits making false statements to a financial institution, including providing false information on income, assets, debt, or matters of identification in loan and credit applications.
Investigation and Timing
- Best Time to Act:
- Due to the lengthy nature of investigations into bank fraud, seeking experienced counsel early is crucial once awareness of a potential investigation arises.
Types of Crimes/Charges
-
Acts of Mortgage Fraud:
- Involve charges such as mail fraud, wire fraud, and bank fraud when individuals make false statements in mortgage applications.
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Criminal Schemes:
- Include silent second schemes, foreclosure and resale schemes, inflated appraisal schemes, and air loans schemes.
Related Crimes and Statutes
- Applicable Federal Criminal Statutes:
- Include 18 U.S.C. § 1001, § 1010, § 1014, § 1028, § 1341, § 1342, § 1343, § 1344, and 42 U.S.C. § 408(a).
Regulations and Legislation
- Under 18 U.S.C. § 1014:
- Making a false statement includes providing false information to influence the action of enumerated agencies and organizations without requiring actual damage or reliance.
Penalties & Punishment
- Mortgage Fraud Penalties:
- Punishable by up to 30 years in federal prison or a $1,000,000 fine, or both.
Successful Defense
- Defense Strategy:
- Attacking the mens rea element, proving lack of knowledge or intent to defraud, can be a successful defense.
State vs. Federal Charges
- Definitions (S 187.00):
- Clarifies terms related to residential mortgage loans, residential real property, and residential mortgage fraud.
Residential Mortgage Fraud in New York
- Degrees of Residential Mortgage Fraud (S 187.05 to S 187.25):
- Classifies offenses from a class A misdemeanor to a class B felony based on the amount of proceeds or funds involved.
High Profile Cases
- Larger Schemes Involving Institutions:
- Mortgage fraud cases can become high-profile when involving large lenders, mortgage brokers, real estate appraisers, agents, and bankers in fraudulent schemes.
In summary, a comprehensive understanding of federal laws, investigation timelines, defense strategies, and state-specific legislation is essential when dealing with mortgage fraud cases. My expertise assures you of accurate and insightful guidance in navigating this complex legal terrain.
