Mortgage fraud is investigated and prosecuted by both state and federal law enforcement agencies. Under federal law, there is no statue specifically for mortgage fraud, although federal law enforcement authorities can prosecute these crimes under a wide variety of existing criminal statutes, including conspiracy, bank fraud, mail and wire fraud, and money laundering.
The attorneys at Escobar & Associates have successfully handled many cases dealing with mortgage fraud and real estate fraud schemes. Mortgage fraud cases are considered white collar crimes in many respects. These cases often involve voluminous documentation as well as complicated financial and accounting issues.
Unlike typical white collar crime cases, prosecutors often indict mortgage fraud cases as conspiracies with multiple defendants, which can include the buyer and seller, mortgage broker, real estate agents, and appraisers, and title agents. This type of indictment structure is also often used in drug trafficking conspiracy cases. Federal law enforcement agents are also increasingly using drug case techniques to investigate mortgage fraud, including using wiretaps and surveillance.
Prosecutions For Mortgage Fraud Are Increasing Dramatically
The FBI has reported that pending FBI mortgage fraud investigations have jumped from 436 cases in fiscal year 2002 to 1,036 cases in March 2007. Likewise, suspicious activity reports related to mortgage fraud have increased by over 1000 percent between 1997 and 2005. This dramatic increase in mortgage fraud investigations can be attributed to many factors, including: the easing of underwriting procedures, which allow for little or no down payment, the dramatic increase in nontraditional mortgage products that require less verification, including no-document, interest only, and stated income loans, and the dramatic increase in real estate prices over the past 10 years.
The most common mortgage fraud schemes include equity skimming and property flipping.
Equity skimming occurs when an investor uses a straw buyer to purchase a property. The investor then takes over the management of the property, and rents out the property. The investor collects the rent, but fails to pay the mortgage. Eventually, the property goes into foreclosure, the renter moves out, and the investor pockets all of the rent payments.
Property flipping occurs when properties are purchased for market value, and then quickly sold for an artificially inflated price. A participant in the scheme takes the profit after the second sale. The price can be artificially inflated using false or fraudulent appraisals. The owner of the property then fails to make the required payments to the lender, and the property eventually goes into foreclosure, leaving the lender with a huge loss. The owner of the property is often “set up” and unaware that he or she is purchasing the property for an artificially inflated price.
As investigations and prosecutions for mortgage fraud increase, our office continues to stay abreast of recent developments in this area of the law. If you are currently under investigation for any type of mortgage fraud, contact the law firm of Escobar & Associates.