{"id":352109,"date":"2023-08-29T14:52:52","date_gmt":"2023-08-29T19:52:52","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/criminal\/criminal-charges\/mortgage-fraud.html"},"modified":"2025-06-02T14:52:00","modified_gmt":"2025-06-02T19:52:00","slug":"mortgage-fraud","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/criminal\/criminal-charges\/mortgage-fraud.html","title":{"rendered":"Mortgage Fraud Criminal Charges"},"content":{"rendered":"\n<div class=\"wp-container-core-columns-is-layout-9d6595d7 fl-sectionWithSidebar fl-container fl-flex fl-flex-wrap fl-gap30\">\n    \n    <div class=\"fl-page-articles fl-section-main fl-section-main-full-width\">\n        <h1 class=\"fl-no-margin-top\">Mortgage Fraud Criminal Charges<\/h1>\n<section class=\"fl-gutenberg-byline\">\n    <div class=\"fl-gutenberg-byline-content\">\n                    By <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\">FindLaw Staff<\/a> | Legally reviewed by <a\n                href=\"https:\/\/www.findlaw.com\/company\/our-team\/melissa-bender-esq\/\">Melissa Bender, Esq.<\/a>\n                | Last reviewed\n        <time>\n                            June 02, 2025\n                    <\/time>\n    <\/div>\n\n    \n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-legally-reviewed\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Legally Reviewed\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>This article has been written and reviewed for legal accuracy, clarity, and style by <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\">FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with <a href=\"https:\/\/www.findlaw.com\/company\/company-history\/editorial-policy.html\">our editorial standards<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n\n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-fast-checked\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Fact-Checked\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>The last updated date refers to the last time this article was reviewed by FindLaw or one of our <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/contributing-authors.html\">contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please <a href=\"https:\/\/lawyers.findlaw.com\/?fli=bylinelink\" target=\"_blank\" rel=\"noopener\">contact an attorney in your area<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n<\/section>\n    <div class=\"fl-callout-text article-blockquote\">\n        <p>Mortgage fraud includes various illegal schemes. These schemes involve misrepresentation or misstatement on mortgage documents.<\/p>\n\n    <\/div>\n\n<p>Mortgage fraud may involve fake W-2 forms or inflated property appraisals submitted by:<\/p>\n<ul>\n<li>A homebuyer<\/li>\n<li>A mortgage broker<\/li>\n<li>Other real estate professional<\/li>\n<\/ul>\n<p>In general, fraud involves two parties:<\/p>\n<ul>\n<li>The party providing false information<\/li>\n<li>The party that relies on that information to complete a transaction<\/li>\n<\/ul>\n<p>Such crimes are commonly prosecuted as&nbsp;<a href=\"https:\/\/www.findlaw.com\/criminal\/criminal-charges\/wire-fraud.html\">wire fraud<\/a>, bank fraud, and&nbsp;<a href=\"https:\/\/www.findlaw.com\/criminal\/criminal-charges\/conspiracy.html\">conspiracy<\/a>.&nbsp;Federal statutes do not directly reference &quot;mortgage fraud.&quot;<\/p>\n<p>Mortgage fraud cases often carry severe consequences for the defendants. The criminal charges that such cases bring can affect a criminal record irreparably. Mortgage fraud charges are serious. Learn more below or call a <a href=\"https:\/\/lawyers.findlaw.com\/criminal-law\/?fli=dcta\" target=\"_blank\" rel=\"noopener\">criminal defense attorney<\/a> for advice.&nbsp;<\/p>\n<h2>FERA and the Prosecution of Mortgage Crimes<\/h2>\n<p>The&nbsp;<a href=\"https:\/\/www.congress.gov\/111\/crpt\/srpt10\/CRPT-111srpt10.pdf\" target=\"_blank\" rel=\"noopener\">Fraud Enforcement and Recovery Act<\/a>&nbsp;(FERA) expanded the reach of federal law enforcement officials. It did so in enforcing mortgage fraud laws. FERA took effect in 2009.&nbsp;<\/p>\n<p>Sentences under FERA can include $1 million fines and 30-year prison sentences. Some states also have laws that address fraud-related crimes in the mortgage industry.<\/p>\n<p>An investigation may also lead to bankruptcy fraud or&nbsp;<a href=\"https:\/\/www.findlaw.com\/tax\/tax-problems-audits\/income-tax-fraud-vs-negligence.html\">tax fraud<\/a>&nbsp;charges. Authorities tend to target unscrupulous mortgage brokers in investigations. They also target appraisers, real estate attorneys, and other real estate professionals. But sometimes, homebuyers are arrested for providing inaccurate information.<\/p>\n<p>Law enforcement officials recognize two main categories of fraud related to mortgages:<\/p>\n<ul>\n<li><b>Fraud for Housing:<\/b>&nbsp;A borrower submits false, incomplete, or inaccurate information. They do so to qualify for a loan or to get more favorable terms when buying a home. This type of fraud affects homeowners.<\/li>\n<li><b>Fraud for Profit:<\/b>&nbsp;A real estate professional commits fraud to extract money from a property or transaction. Examples of real estate professionals include appraisers and mortgage brokers.<\/li>\n<\/ul>\n<p>Cases involving FERA violations are heard in federal court. The law pertains to federal mortgage fraud. Violations of FERA are a federal crime. Federal charges like these can carry heavy penalties. The Federal Bureau of Investigations (FBI) handles investigations. Prison sentences are served in federal prisons.<\/p>\n<h2>Common Types of Mortgage Fraud<\/h2>\n<p>Mortgage transactions provide ample opportunities for&nbsp;<a href=\"https:\/\/www.findlaw.com\/criminal\/criminal-charges\/fraud.html\">fraud<\/a>. They do so because they involve multiple parties and large sums of money. These transactions are part of the lending process for buying a home. Some such schemes are sophisticated and unique, but the following types are the most common:<\/p>\n<ul>\n<li><b>Fraudulent Supporting Loan Documentation:<\/b>&nbsp;A loan applicant submits forged or altered paycheck stubs. They might submit other fraudulent documentation.<\/li>\n<li><b>Property Flipping:<\/b>&nbsp;A piece of real estate is purchased, appraised at a falsely inflated value, and then quickly resold. The fraudulent appraisal makes this practice illegal, as &quot;flipping&quot; during a housing boom is not necessarily illegal.<\/li>\n<li><b>Straw Buyers:&nbsp;<\/b>The borrower&#8217;s identity is hidden through the use of a nominee, in whose name and credit history the loan application is made.<\/li>\n<li><b>Silent Second:&nbsp;<\/b>The buyer takes out a second mortgage to cover the down payment on the initial loan. It is illegal because the second, smaller loan is taken out without the initial lender&#8217;s knowledge.<\/li>\n<li><b>Stolen Identity:<\/b>&nbsp;A mortgage loan applicant uses a fictitious or&nbsp;<a href=\"https:\/\/www.findlaw.com\/criminal\/criminal-charges\/identity-theft.html\">stolen identity<\/a>. If stolen, the true person&#8217;s name, personal information, and credit history are used without their knowledge. This variety of mortgage fraud involves identity theft.<\/li>\n<li><b>Equity Skimming:<\/b>&nbsp;An investor uses a straw buyer, false credit reports, and false income documents to get a mortgage in the straw buyer&#8217;s name. The straw buyer signs the property over to the investor after closing, relinquishing all property rights. The investor makes no payments but rents the property until it is foreclosed.<\/li>\n<li><b>Inflated Appraisal:<\/b>&nbsp;The appraiser, colluding with the mortgage broker and\/or loan officer, provides unrealistically high appraisal value to match the buyer&#8217;s offer and complete the deal.<\/li>\n<\/ul>\n<p>Whatever the variety of fraud, they all tend to involve false statements.<\/p>\n<h2>State Mortgage Fraud Laws<\/h2>\n<p>More than one-third of U.S. states, including California, Florida, and New York, have laws prohibiting at least one form of mortgage fraud. The New York law (<a href=\"https:\/\/codes.findlaw.com\/ny\/penal-law\/pen-sect-187-00.html\" target=\"_blank\" rel=\"noopener\">New York Penal Code, Article 187<\/a>), for example, defines &quot;residential mortgage fraud&quot; as an intentional act involving statements containing false information or that conceal information to mislead another party. The crime is prosecuted as a class A misdemeanor to a class B felony offense, depending on the severity of the offense.<\/p>\n<p>Federal sentences are more severe than state sentences for mortgage fraud convictions. Talk to a local attorney to learn more about the laws in your state, including&nbsp;<a href=\"https:\/\/www.findlaw.com\/realestate\/mortgages-equity-loans\/how-to-avoid-mortgage-fraud.html\">ways to avoid being a victim<\/a>&nbsp;of this crime.<\/p>\n<h2>Civil Liability for Mortgage Fraud<\/h2>\n<p>Those accused of committing mortgage fraud may also be held liable for monetary damages incurred by the lender. Civil claims may be based on contractual theories, misrepresentation and\/or deceit, conspiracy to defraud the lender, or breach of trust.<\/p>\n<p>Third parties involved in the fraudulent transaction, such as mortgage brokers or appraisers, may also be liable for damages. If the fraud involves a financial institution, they may be held liable, too. The same applies to mortgage lenders, real estate agents, and underwriters.<\/p>\n<h2>Charged with Mortgage Fraud? Get in Touch with an Attorney<\/h2>\n<p>Inflating a property&#8217;s value, overstating your income on a loan application, or conspiring with another investor to buy property are all vigorously investigated and punished. If you&#8217;re being investigated for mortgage fraud or any other crime, it&#8217;s a good idea to contact a local&nbsp;<a href=\"https:\/\/lawyers.findlaw.com\/criminal-law\/?fli=dcta\" target=\"_blank\" rel=\"noopener\">criminal defense attorney<\/a>&nbsp;to discuss the facts of your case.<\/p>\n<p>This area of white-collar crime can be complicated. Contact an attorney today. A lawyer specializing in this area of criminal law can help. Their legal advice can be invaluable.<\/p>\n<div class=\"was-this-helpful\">\n    <div\n            class=\"was-this-helpful__question-container\"\n            aria-labelledby=\"was-this-helpful__question\"\n            role=\"group\"\n    >\n        <span\n                id=\"was-this-helpful__question\"\n                class=\"was-this-helpful__question fl-text-lg-bold\"\n        >Was this helpful?<\/span>\n        <button\n                class=\"was-this-helpful__button fl-text-sm\"\n                aria-label=\"Yes\"\n                value=\"yes\"\n        >\n            <span class=\"was-this-helpful__button-text fl-text-bold\">Yes<\/span>\n            <i class=\"was-this-helpful__button-icon\">\n                <svg width=\"22\" height=\"22\" viewBox=\"0 0 22 22\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\">\n                    <g id=\"thumbs-up\" clip-path=\"url(#clip0_604_3418)\">\n                        <path id=\"Vector\"\n                              d=\"M6 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