Mortgage Fraud Charges & Penalties by State

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Mortgage fraud is an incredibly complicated crime. It is believed that, if accidental omissions and errors were included, at least 10% of all mortgage applications would be fraudulent. What makes something a crime, however, is intent. It can be very difficult to prove whether or not someone intentionally omitted a piece of information, or intentionally provided the wrong information. As a result, it is very rare for a mortgage fraud case to make it to court.

Mortgage Fraud Laws

Mortgage fraud is covered under the 2009 FERA (Fraud Enforcement and Recover Act). This Act has highlighted the fines and prison sentences relating to mortgage fraud. FERA is a federal legislation, and most states also have their own laws in place. If charges are brought, they usually also incur tax fraud and bankruptcy fraud charges. Those most often targeted are real estate professionals, real estate attorneys, appraisers, and mortgage brokers. However, it is possible for a regular home buyer to be targeted as well.

Mortgage fraud laws are divided into two specific categories, which are:

  1. Fraud for housing, in which someone submits inaccurate information in order to be able to buy a home under more favorable terms
  2. Fraud for profit, in which a real estate professional falsifies information so that they can get more money out of a transaction

Mortgage Fraud Crimes & Charges

The crime of mortgage fraud only takes place if omissions are made or false information is intentionally submitted. Accidental mistakes, therefore, do not constitute a crime. It is very difficult to make the distinction between these two, particularly when an individual home buyer is involved. With mortgage professionals, however, the distinction is often easier to spot due to repeated mistakes and evidence of kickbacks. Federal prosecutions exist in terms of mortgage fraud. Almost exclusively, these target fraud for profit, rather than for housing. If applicable, federal prosecutors may also bring forward RICO (Racketeer Influenced and Corrupt Organizations) charges. This has become more common in professional mortgage situations since the housing bubble burst.

Mortgage Fraud Penalty

The crime of mortgage fraud is very serious, and the penalties are hefty. Most often, multiple crimes are involved and they exist at federal and state levels. As a result, there is a wide variety of penalties possible as well. Most of the time, mortgage fraud is classed as a felony offence, although if the amount involved in below $1,000, it is usually classed as a misdemeanor. Common punishments include:

  • A prison sentence. On federal level, this could be as much as 30 years at federal level, or around five years at state. For a misdemeanor offense, jail sentences of up to one year can be imposed.
  • A fine, which is often significant. A single federal charge can result in a fine of $1,000,000. At state level, they usually range from a few thousand to $100,000, depending on whether the crime was a misdemeanor or a felony.
  • Restitution, which means that injured parties are compensated for any injury they sustained. This is usually a payment to the mortgage lender.
  • Probation, which is usually one year in length and follows a prison or jail sentence. It is becoming increasingly common for probation to be longer than one year. Terms of probation include frequent reports to probation officers, not committing further criminal acts, and submitting to random drug tests.

Under FERA, law enforcement officials can further enforce the laws. It is under FERA that a prison sentence of 30 years can be imposed, as well as a $1,000,000 fine.

Mortgage Fraud Sentencing Guidelines

Sentencing guidelines urge a judge to first determine whether fraud for housing or fraud for profit was committed, with the latter being a more serious offense. The amount of offenses, the length of time it was committed, and the amount of money involved are also important factors. Additionally, the judge will take into consideration whether other crimes have been committed as well.

Mortgage Fraud Statute of Limitations

In the past, the statute of limitations across the country for all fraud cases was five years. However, a new law was established in 2009 by President Obama, which increased it to 10 years. Furthermore, the statute can be tolled if the defendant is not in the state or the country.

Mortgage Fraud Cases

  • A woman from Webster has been sentenced to four months of weekend jail time after having been convicted of being involved in a mortgage fraud case. The case itself happened in 2010. Fifty one year old Janet Leigh Faticone also has to pay restitution, or face a further six months in jail. She paid the restitution, and this enabled the judge to give her a lower sentence, as well as five years’ probation. Interestingly, Faticone was charged with a number of other offenses. Furthermore, it wasn’t the first time that she faced fraud charges, and has been convicted of them. (WHEC Rochester)
  • Ten people have been sentenced to a total of over 52 years in jail for mortgage fraud. Spiritualist faith healer Saint Pir Pandariman was identified as the main culprit and he was jailed the longest. Interestingly, this case took place in the United Kingdom, but it is believed Pandariman may have fraudulently obtained properties abroad as well. Further investigations are pending. (Stoke Sentinel)
  • An attorney has been sentenced to four years in prison for mortgage fraud. Forty seven year old Avalon Betts-Gaston, from Naperville, has been convicted of two wire fraud cases. She claimed to help customers refinance their home, while she actually sold them to straw buyers, effectively defrauding home owners of their property rights. She has been sentenced to 57 months and also has to pay restitution. (Chicago Sun Times)
  • Paul Chemidlin Jr has been sentenced to five years in prison for mortgage fraud. He provided false property records for many years. Besides a prison sentence, he will also have to pay $1.5 million in restitution, as well as three years’ probation. Chemidlin entered a guilty plea in relation to 15 different properties. Losses of $5 million followed due to the behavior of Chemidlin and nine other people. (NJ True Jersey)
  • Alberta Law Enforcement is making a second attempt at charging someone with mortgage fraud. In 2013, a $200,000 Ferrari was seized, believed to have been purchased through criminal activity. The Ferrari had to be returned when no proof was forthcoming. However, several years later, further charges have been brought against some of the original defendants as there is now more clarity in terms of who actually did what within the crimes. (Calgary Sun)

Mortgage Fraud Laws By State

Mortgage fraud involves the intentional misrepresentation, omission, or falsification of information on a mortgage application or during the mortgage lending process to obtain a loan or larger loan than would have been obtained under normal circumstances. The specifics and penalties for mortgage fraud vary by state:

AlabamaHawaiiMassachusettsNew MexicoSouth Dakota
AlaskaIdahoMichiganNew YorkTennessee
ArizonaIllinoisMinnesotaNorth CarolinaTexas
ArkansasIndianaMississippiNorth DakotaUtah
CaliforniaIowaMissouriOhioVermont
ColoradoKansasMontanaOklahomaVirginia
ConnecticutKentuckyNebraskaOregonWashington
DelawareLouisianaNevadaPennsylvaniaWest Virginia
FloridaMaineNew HampshireRhode IslandWisconsin
GeorgiaMarylandNew JerseySouth CarolinaWyoming

Alabama

Under Code of Alabama Section 13A-9-110:

  • Mortgage fraud is a Class C felony, punishable by up to 10 years in prison and fines up to $15,000.

Alaska

Under Alaska Stat. Section 11.46.600:

  • Mortgage fraud is a Class B felony, punishable by up to 10 years in prison and fines up to $100,000.

Arizona

Under A.R.S. Section 13-2320:

  • Mortgage fraud is a Class 2 felony, punishable by up to 12.5 years in prison and significant fines.

Arkansas

Under Ark. Code Ann. Section 5-37-227:

  • Mortgage fraud is a Class B felony, punishable by up to 20 years in prison and fines up to $15,000.

California

Under California Penal Code Section 532f:

  • Mortgage fraud can be a felony, punishable by up to 5 years in prison and fines up to $50,000 or double the fraud amount.

Colorado

Under Colo. Rev. Stat. Section 18-4-401:

  • Mortgage fraud is a Class 3 felony, punishable by up to 12 years in prison and fines up to $750,000.

Connecticut

Under Connecticut General Statutes Section 53a-128c:

  • Mortgage fraud is a Class B felony, punishable by up to 20 years in prison and fines up to $15,000.

Delaware

Under Title 11, Section 841:

  • Mortgage fraud is a Class E felony, punishable by up to 5 years in prison and fines determined by the court.

Florida

Under Florida Statutes Section 817.545:

  • Mortgage fraud is a first-degree felony, punishable by up to 30 years in prison and fines up to $10,000.

Georgia

Under Georgia Code Section 16-8-102:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $10,000 per violation.

Hawaii

Under Hawaii Revised Statutes Section 708-850:

  • Mortgage fraud is a Class C felony, punishable by up to 5 years in prison and fines up to $10,000.

Idaho

Under Idaho Code Section 18-3106:

  • Mortgage fraud is a felony, punishable by up to 14 years in prison and fines up to $5,000.

Illinois

Under Illinois Compiled Statutes 720 ILCS 5/17-10.5:

  • Mortgage fraud is a Class 1 felony, punishable by up to 15 years in prison and fines up to $25,000.

Indiana

Under Indiana Code Section 35-43-5-11:

  • Mortgage fraud is a Level 5 felony, punishable by up to 6 years in prison and fines up to $10,000.

Iowa

Under Iowa Code Section 714.10:

  • Mortgage fraud is a Class C felony, punishable by up to 10 years in prison and fines up to $10,000.

Kansas

Under Kansas Statutes Section 21-5827:

  • Mortgage fraud is a severity level 7 felony, punishable by up to 34 months in prison and fines up to $100,000.

Kentucky

Under Kentucky Revised Statutes Section 291.190:

  • Mortgage fraud is a Class D felony, punishable by up to 5 years in prison and fines determined by the court.

Louisiana

Under Louisiana Revised Statutes Section 14:71.3:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $100,000.

Maine

Under Maine Revised Statutes Title 17-A, Section 354:

  • Mortgage fraud is a Class C crime, punishable by up to 5 years in prison and fines up to $5,000.

Maryland

Under Maryland Code Section 7-402:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $100,000.

Massachusetts

Under Massachusetts General Laws Chapter 266, Section 35A:

  • Mortgage fraud is a felony, punishable by up to 5 years in prison and fines up to $10,000.

Michigan

Under Michigan Compiled Laws Section 750.218:

  • Mortgage fraud is a felony, punishable by up to 20 years in prison and fines up to $100,000.

Minnesota

Under Minnesota Statutes Section 609.82:

  • Mortgage fraud is a felony, punishable by up to 20 years in prison and fines up to $100,000.

Mississippi

Under Mississippi Code Section 97-7-10:

  • Mortgage fraud is a felony, punishable by up to 5 years in prison and fines up to $100,000.

Missouri

Under Missouri Revised Statutes Section 570.220:

  • Mortgage fraud is a Class C felony, punishable by up to 7 years in prison and fines up to $10,000.

Montana

Under Montana Code Annotated Section 45-6-325:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $50,000.

Nebraska

Under Nebraska Revised Statutes Section 28-617:

  • Mortgage fraud is a Class IV felony, punishable by up to 5 years in prison and fines up to $10,000.

Nevada

Under Nevada Revised Statutes Section 205.372:

  • Mortgage fraud is a Category C felony, punishable by up to 5 years in prison and fines up to $10,000.

New Hampshire

Under New Hampshire Revised Statutes Section 638:20:

  • Mortgage fraud is a Class A felony, punishable by up to 15 years in prison and fines up to $4,000.

New Jersey

Under New Jersey Statutes Section 2C:21-4.6:

  • Mortgage fraud is a second-degree crime, punishable by up to 10 years in prison and fines up to $150,000.

New Mexico

Under New Mexico Statutes Section 30-16-33:

  • Mortgage fraud is a third-degree felony, punishable by up to 3 years in prison and fines up to $5,000.

New York

Under New York Penal Law Section 187.10:

  • Mortgage fraud is a Class C felony, punishable by up to 15 years in prison and fines determined by the court.

North Carolina

Under North Carolina General Statutes Section 14-118.12:

  • Mortgage fraud is a Class H felony, punishable by up to 39 months in prison and fines determined by the court.

North Dakota

Under North Dakota Century Code Section 12.1-23-10:

  • Mortgage fraud is a Class A felony, punishable by up to 20 years in prison and fines up to $20,000.

Ohio

Under Ohio Revised Code Section 2913.13:

  • Mortgage fraud is a first-degree felony, punishable by 3 to 11 years in prison and fines up to $20,000.

Oklahoma

Under Oklahoma Statutes Section 21-1523:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $10,000.

Oregon

Under Oregon Revised Statutes Section 165.692:

  • Mortgage fraud is a Class C felony, punishable by up to 5 years in prison and fines up to $125,000.

Pennsylvania

Under Pennsylvania Consolidated Statutes Section 4117:

  • Mortgage fraud is a felony of the third degree, punishable by up to 7 years in prison and fines up to $15,000.

Rhode Island

Under Rhode Island General Laws Section 11-18-34:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $50,000.

South Carolina

Under South Carolina Code Section 16-13-420:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $5,000.

South Dakota

Under South Dakota Codified Laws Section 22-30A-10.1:

  • Mortgage fraud is a Class 4 felony, punishable by up to 10 years in prison and fines up to $20,000.

Tennessee

Under Tennessee Code Annotated Section 39-14-152:

  • Mortgage fraud is a Class D felony, punishable by up to 12 years in prison and fines up to $50,000.

Texas

Under Texas Penal Code Section 32.32:

  • Mortgage fraud is a state jail felony, punishable by up to 2 years in state jail and fines up to $10,000. Severe cases can be first-degree felonies.

Utah

Under Utah Code Section 76-6-1203:

  • Mortgage fraud is a second-degree felony, punishable by up to 15 years in prison and fines up to $10,000.

Vermont

Under Vermont Statutes Title 13, Section 2033:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $10,000.

Virginia

Under Virginia Code Section 18.2-178:

  • Mortgage fraud is a Class 6 felony, punishable by up to 5 years in prison and fines determined by the court.

Washington

Under Revised Code of Washington Section 9A.60.070:

  • Mortgage fraud is a Class B felony, punishable by up to 10 years in prison and fines up to $20,000.

West Virginia

Under West Virginia Code Section 61-3-24e:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $10,000.

Wisconsin

Under Wisconsin Statutes Section 943.58:

  • Mortgage fraud is a Class H felony, punishable by up to 6 years in prison and fines up to $10,000.

Wyoming

Under Wyoming Statutes Section 6-3-803:

  • Mortgage fraud is a felony, punishable by up to 10 years in prison and fines up to $10,000.

Mortgage Fraud Quick Links & References