In the wake of the housing crisis, federal regulators and law enforcement officials are carefully scrutinizing home equity loans and other transactions that could be related to potential fraud charges. In some cases, individuals who were only tangentially involved in one of these suspected schemes may not even have known about the scheme’s existence.

Recently, six individuals, including four from the metro Atlanta area, were sentenced in an alleged conspiracy that involved the fraudulent submission of home equity loan applications. The sentences in this matter ranged from one to six years of incarceration.

Prosecutors claim that the individuals who led this scheme would arrange for “straw borrowers” to use invalid deeds and other documents to apply for home equity loans. These alleged straw borrowers did not actually have any valid financial interest in the properties against which they were trying to borrow.

Law enforcement officials claim that the proceeds of the home equity loans would then be funneled back to those conducting the scheme, while the straw borrowers would receive cash and other items of value in exchange for their participation in the scheme.

In any prosecution that involves an alleged conspiracy, there is a question as to how various suspects are prosecuted and sentenced in reference to their level of involvement in the alleged scheme. Prosecutorial zeal to cast a wide net in this type of investigation can lead to serious charges against individuals who had no knowledge of the actual scope and intent of the alleged conspiracy.

Source: Atlanta Journal Constitution, “6 sentenced in home equity scam,” Christopher Seward, April 28, 2012