Many Tennessee residents know that applying for a mortgage may be confusing and frustrating, especially with the lending changes that have occurred since the 2008 housing market crash. Making minor false statements on a loan application may seem innocuous, especially if listing factual data makes it difficult to qualify for a mortgage. However, the recent increase in mortgage fraud cases and convictions shows that there may be significant consequences to such actions.

Individuals who receive convictions for mortgage fraud may face fines and even imprisonment. In 2017, the United States Department of Justice reported the story of a Memphis real estate investor who pled guilty to mortgage fraud. This person made false statements on loan documents to secure funding from various lenders and dispensed some of the loan proceeds to borrowers who were purchasing his properties. The FBI and other federal agencies participated in the investigation. The maximum possible penalties for the crimes included a fine of $1 million and up to 30 years in prison.

There are several types of mortgage fraud that may trigger federal investigations and harsh penalties. Realtor Magazine reported that in the second quarter of 2018, there was false information in approximately one out of every 109 mortgage applications.

According to the statistics from 2018, income fraud was a frequent issue. This term relates to applicants misrepresenting their source or amount of income. Other common types of mortgage fraud include failing to disclose foreclosures and using a stolen identity to apply for loans. Many applicants commit occupancy fraud by lying about the intended use of a property. In most cases, people try to get better mortgage rates for a rental property by falsely stating that the property will serve as a primary residence. While rising home prices and economic instability may motivate borrowers to commit mortgage fraud, illegal actions may have significant penalties.