Mortgage fraud is a very complex crime that can involve lenders and borrowers alike. It is believed that 10% of all applications for mortgages in the country contain omissions, be they mistaken or intentional. It is very hard to prove intentional omission, however, and this is one of the reasons why mortgage fraud prosecutions have been very rare.
Mortgage fraud happens when someone intentionally confuses, lies or omits information when they apply for a mortgage. This can be done by lenders and borrowers alike. In Florida, there is a specific statute that covers mortgage fraud. However, in many cases, prosecution is done on a federal level. It is also important to understand that there are different types of mortgage fraud. These include:
- Borrower fraud, whereby the borrower intentionally lies or omits important information. This type of fraud is also known as fraud for housing.
- Professional fraud, whereby the lender commits fraud in order to profit. This is also known as fraud for profit. It can involve any professional within the mortgage process, including accountants, real estate agents or appraisers, attorneys, bankers, credit agencies, builders and more.
Single and multiple actions are also recognized. Fraud for housing is generally a single action, whereas fraud for profit is usually multiple action, as the same type of fraud, such as flipping, will happen again and again until the professional is caught.
What sets mortgage fraud apart as a type of fraud is that it involves intent, stepping away from a mistake. It is the responsibility of the prosecution to demonstrate this intent, which can be very difficult to make. Even if the result of the fraud is not what was intended (the individual may not be given a mortgage or the professional may not be make a profit), it is still classed as fraud and prosecuted as such.
Prosecutors can charge both organizations and individuals. Additionally, if it crosses state lines, federal prosecutors will also get involved. Additionally, it is possible, particularly in federal cases, for RICO charges to be made against the defendant. Indeed, this is becoming more and more common, particularly in professional fraud cases.
Laws and Penalties
Mortgage fraud is a very serious crime and very serious penalties can be imposed. Additionally, the crime often involves multiple laws, often on both state and federal levels. As a result, there are many different types of penalties and punishments as well. In almost all cases, it is classed as a felony offense, but if the amount involved is below $1,000, it can be classed as a felony as well.
In Florida, if the fraud is less than $100,000, it is charged as a 3rd degree felony. If the fraud involves more than $100,000, it is classed as a second degree felony.
Common penalties include:
- Prison sentences. These can be significant, particularly if prosecuted at federal level, where the prison sentence can be as much as 30 years.
- Fines. The fines are generally incredibly high, particularly in cases of fraud for profit. Indeed, at federal level, the fine can be as high as $1 million.
- Restitution. In almost all cases, restitution will have to be made for any financial losses to third parties. This compensates the injured party of any wrongdoing against them.
- Probation. This can be imposed on top of or separately from fines, prison and restitution. Usually, probation will be at least one year, but it is not uncommon for it to be much longer.
Mortgage Fraud Defenses
In almost all cases, the defense for mortgage fraud will be that there was no criminal intent and that the mistakes and omissions were accidental. It is very difficult to prove that a mistake was intentionally made, except in the case of professional mortgage fraud, where the same mistake will generally be made several times.
Statute of Limitations
In the past, the statute of limitations on all kinds of fraud cases was five years. However, President Obama has established a new law in 2009, which increased the statute of limitations to 10 years. Additionally, Florida can toll the statute if the defendant is out of state.
Mortgage Fraud Cases
- Former North Miami Mayor’s co-conspirator in mortgage fraud slapped with 8 years in prison
- Final resolution announced in $35M C. Fla. mortgage fraud case
- North Hills man charged in Fla. mortgage fraud
- South Florida couple claims Wells Fargo engaged in fraud
- McCandless mortgage broker company president charged with bank fraud conspiracy