Mortgage Loan Fraud Penalties: All You Need To Know

Experts from the industry will agree when I say that a Mortgage Loan Fraud is a grim felony of significant consequences. The repercussions involve an imprisonment sentence of a maximum of thirty years. Any lender, a real estate professional, or an individual who is found guilty of intentionally excluding or misstating the facts on a loan agreement, has substantial chances of coming under the legal scanner. On the other hand, if similar mistakes are found to be unintentional, then the above-stated offence may not apply.

Mortgage loan fraud refers to fraudulent activities that are carried out with a calculated and planned intention of extracting money/housing.

As a practicing private mortgage lender in Miami, I have seen numerous instances of this felony in this industry. To interpret the concept in detail, it is important to have a clear understanding of the different types of Mortgage Loan frauds:

Fraud for Profit

According to the Federal Bureau of Investigation (FBI), loan frauds can be of two types, ‘for housing’, and for ‘for profit.’

Fraud for profit, also termed as an Insider Loan Fraud, is said to have taken place when an industry professional like an appraiser, mortgage broker or a real estate agent commits the fraud by taking advantage of his specialized knowledge.

The loan modification scams and sophisticated flipping are classified under this section. The losses resulting out of these frauds are huge and are the outcomes of multiple complicated loan applications and schemes.

Mortgage Loan Fraud Penalties All You Need To Know

Fraud for Housing

There have been instances of several borrowers carrying out fraudulent transactions for the purpose of gaining ownership of the house of their choice. For example, giving a false statement regarding occupation of the property for personal purposes, overstating the asset statement, giving false information about down payment source to the loan giver, etc., are counted as Housing fraud.

Housing frauds are, generally, a one-time misdeed. The losses of the fraud are also comparatively lesser as compared to fraud for profit.

Penalty Varies as Per Geographical Boundaries

Mortgage loan frauds, if found guilty of, could get an offender up to a thirty year jail time. The right setting for a federal prosecution has cases involving federal agencies, professionally formulated schemes, or interstate fraud occurrences.

When it comes to state-level cases, there might be additional elements to consider as well. In mortgage loan frauds on the state level, the duration of the sentence will be primarily dependent on the criminal charge. Depending upon the seriousness of the crime committed, the punishment for the convicted, can vary from a few months sentence to that of multiple years. There are many states that acknowledge mortgage loan fraud as a criminal offence, while there are also others who view this in line with other fraudulent activities like forgery, money laundering, bank bribe, wire frauds, etc.

Financial Penalties can Kill your Account

Mortgage frauds can have serious financial repercussions. Besides the jail term, a proven mortgage loan fraud could end up with the guilty party paying up colossal financial fines, sometimes in figures of up to $ 1 million per individual fraud count! The fines might start at a few hundred dollars but can end up on millions!

Besides this criminal financial punishment, the guilty party can be ordered by court to pay a ‘Restitution.’ Restitution can be defined as a sum of money that must be given to the lender to make up for the deficit suffered. In few states, the court may not consider your ability for making the restitution payment.

A mortgage loan is a serious business. It is best never to rush into making decisions of a similar nature without giving it due thought and consideration. If you feel unsure of where to turn to, you could always seek the help of a trusted friend or a reputed professional in the field.

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