Allegations of mortgage fraud can have far-reaching consequences, including fines and jail time. If you’re a real estate broker, it could also lead to a revocation of your license. That’s why, before you buy or sell a home, it’s important to inform yourself as to what constitutes mortgage fraud, so that you can avoid allegations or defend yourself against them if they come.
Types of mortgage fraud
The term “mortgage fraud” does not refer to one specific offense. Instead, it’s an umbrella term that encompasses any type of fraud or improper behavior involving mortgage documents or payments that defrauds a buyer, seller or lender.
Common types of mortgage fraud include:
- Providing false financing or income information
- Obtaining an improperly inflated appraisal
- Purchasing a property through someone else to use their credit score
- Taking out a second loan to cover the down payment on the first loan
As you can see, these types of fraud could be committed by a buyer, seller, or real estate broker. If you receive a conviction for one of these types of fraud, the consequences can be quite severe.
Penalties for a conviction
Mortgage fraud is often a federal offense, and the FBI is often involved in their investigation. Since mortgage fraud encompasses a variety of offenses, the penalties vary according to the specific crime alleged. For example, the Fraud Enforcement and Recovery Act allows courts to order fines of up to $1 million and 30-year prison sentences for extreme cases. Most cases are not that extreme, however.
For example, earlier this year a man in Maryland received a conviction for offering fraudulent loan modification services. He faces 11 years in prison. Another man in Florida faces over two years in prison for engaging in fraudulent short-sale transactions.
The thought of a conviction for mortgage fraud can be very worrying. However, just because you have a criminal charge does not necessarily mean that you will have a conviction. You will have the option of exercising your Constitutional rights by hiring an attorney and preparing your defense.