Mortgage Fraud: What Is It, and What to Do If You’re Accused

Mortgage fraud is on the rise, up 40% since the pandemic, and the consequences of committing mortgage fraud are serious. Keep reading to find out what it is, and how you can avoid engaging in it. 

What Is Mortgage Fraud? 

Mortgage fraud is when someone deliberately lies or omits information on a mortgage application. According to the Federal Bureau of Investigations (FBI), all mortgage fraud schemes, “… contain a material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan”. For example, a lie that influences a bank’s decision to approve a loan is considered mortgage fraud. 

Two Main Categories of Mortgage Fraud 

Mortgage fraud falls under two main categories: 

Fraud for Profit: This kind of mortgage fraud is most likely committed by industry insiders who know the mortgage business and use that knowledge to commit fraud. There is a high percentage of mortgage fraud that includes bank officers, appraisers, mortgage brokers, attorneys, and loan originators conspiring together to steal. This type of mortgage fraud isn’t about securing a house, it is about misusing the mortgage lending process to take cash and equity from homeowners and lenders. 

Fraud for Housing: This type of mortgage fraud is usually committed by a borrower looking to acquire or maintain ownership of a house. For example, the borrower may misrepresent their income and/or assets on a loan application, or try to persuade an appraiser to falsify the value of a property. 

How Is Mortgage Fraud Detected? 

Financial institutions have many regulations and laws that they must follow or risk being fined or put out of business. Because of this, all of these types of institutions have compliance departments that analyze and investigate suspicious activity. Government agencies oversee that anyone working in the mortgage industry is aware of the written regulations and laws, and that these people are up to date on mandatory continuing education requirements. 

Professional organizations like the Mortgage Bankers Association (MBA), and National Association of Mortgage Bankers (NAMB) have a code of conduct that members must follow. These organizations also oversee that mortgage companies are not committing fraud. 

Who Investigates Mortgage Fraud? 

The FBI is the primary agency responsible for investigating mortgage fraud. Depending on the type of loan used in the fraud, different agencies may be involved in the investigation. These include: 

  • The FBI–Will handle most cases
  • The U.S. Attorney’s Office in the state where the fraud was committed–May handle a fraudulent case if you are a victim in an ongoing case or a case that has already been subject to indictment 
  • Department of Housing and Urban Development (HUD)–If the case involves a loan insured by HUD 
  • Fannie Mae/Freddie Mac — If the case involves a mortgage owned by either organization

Possible Penalties for Mortgage Fraud in New Jersey 

New Jersey state mortgage fraud charges can result in:

  • Fines up to $150,000
  • Prison sentences between 1-10 years
  • Restitution to any injured parties

More penalties are likely depending on your profession. If you are an accountant, property appraiser, or mortgage lender facing fraud charges, professional penalties like your license being taken away or the state board in charge of your field imposing penalties on you is possible. Federal charges could also accompany state mortgage fraud charges which means higher fines and longer prison sentences. 

What To Do if You’re Accused of Mortgage Fraud

Mortgage fraud is treated very seriously in New Jersey. If you’ve been accused or charged with mortgage fraud, the Law Offices of Robert J. DeGroot can help you fight back. Enlisting the help and advice of an experienced criminal defense attorney is a must when facing mortgage fraud charges. 

An experienced criminal defense lawyer, like the team at the Law Offices of Robert J. DeGroot can explain to you every aspect of the mortgage fraud case against you, as well as conduct investigations to make sure the case against you is legitimate. A lawyer can also negotiate to lessen the fines against you and reduce or eliminate prison sentences. Defending yourself against a mortgage fraud accusation is futile, you need a professional, experienced attorney to help you against the charges. 

Have you or someone you know been accused of mortgage fraud? Contact the Law Offices of Robert J. DeGroot for your best defense against the charges.