You participate in mortgage fraud when you engage in illegal activities that involve misrepresenting or misstating information on official mortgage documents. Enacted in 2009, the Fraud Enforcement and Recovery Act expanded mortgage fraud enforcement and made sentences as severe as $1 million in fines and up to 30 years in prison.
Mortgage fraud typically involves two parties: the one relying on false financial information to complete a transaction and the party who provides the inaccurate information. Although mortgage fraud comes in many forms, transaction fraud, income fraud and reporting fraud are the most common.
1. Transaction fraud
When you misrepresent the nature of a mortgage transaction, transaction fraud occurs. For example, if you falsify a down payment amount or create undisclosed agreements with either a buyer or seller, you may face charges for transaction fraud. Many transaction fraud cases involve a straw buyer, which is someone hired to act on behalf of the person actually purchasing the property.
2. Income fraud
If you misrepresent the amount, source or availability of income when qualifying for a mortgage, you commit income fraud. Most people convicted of income fraud either misrepresent their employment or falsely state how much they make.
3. Occupancy fraud
When you apply for a mortgage and misrepresent who will occupy the property, occupancy fraud occurs. One common type of occupancy fraud occurs when buyers state they will use the property for investment purposes. Then, they use the income they expect to earn from the investment property to qualify for that home’s mortgage. Finally, they end up living in the home instead of renting it out.
When you face charges for mortgage fraud, you could face additional penalties for conspiracy, wire fraud, bank fraud and money laundering. Seek the assistance of an attorney who can help you navigate the legal process for mortgage fraud charges and protect your interests.