Mortgage fraud is broadly defined as the manipulation of the mortgage loan process for unlawful gain (of real estate or money). This is usually done through providing false or inaccurate information during the complicated lending process. Mortgage fraud can be committed by the borrower or by any of the housing professionals involved in the process of buying/selling a piece of real estate.
There are many types of mortgage fraud, but most generally fall within two categories:
- Fraud for housing (usually committed by the buyer for the purpose of purchasing a place to live) and fraud for profit (usually committed by housing professionals to generate income unlawfully). That said, let’s look specifically at some common types of mortgage fraud.
- Income fraud: Occurs when a borrower falsifies income records or employment history in an attempt to qualify for the loan.
- Occupancy fraud: Occurs when a borrower falsely claims he/she/they will occupy the property, when in fact they plan on renting it out. (Occupancy usually gives the borrower better loan terms.)
- Appraisal fraud: This is when a dishonest appraiser is hired to inflate the value of the property, usually for a cut of the profit from the sale.
- Illegal flipping: Not to be confused with the legitimate practice of buying a house, making improvements and selling it, illegal flipping occurs when the seller lies about the improvements or overstates their value to bump up the sale price. (This usually also involves appraisal fraud.)
- Straw buyers: This type of mortgage fraud involves employing a “fake” borrower with good credit to hide the identity of the true borrower who would not qualify for the loan. The straw buyer might be a co-conspirator, receiving a cut of the profit, or a victim of the fraud itself, falsely believing he/she is legitimately investing in property only to be left high and dry.
- Predatory lending: Any of a number of bait-and-switch scams in which the lender conceals bad loan terms in the paperwork, duping the borrower into signing the paperwork, then inflating payments and interest after the fact. This is often done with the intent of forcing the borrower into foreclosure shortly after buying the property.
If you’ve been accused of these or other types of mortgage fraud, it’s important to have an experienced criminal defense attorney representing your interests. For expert legal advice, call the Federal Criminal Law Center at 404.633.3797.