Fraud Continues to Defy Regulation

There is a false sense of security in the mortgage industry concerning fraud. Given the current regulations following the financial meltdown in 2008, many are convinced fraud has been eliminated, yet nothing could be further from the truth. Despite new enhanced regulations, the persistent greed of individuals constantly tests the system for “easy money.” An analogy would be the credit card industry and advent of the “chip card” which was supposed to be “swipe proof,” yet cyber criminals have stepped up their game and now routinely crack chip cards.

The same applies to the mortgage industry. New laws, regulations, departments and experts have appeared over the last few years, but mortgage fraud is still growing. The types of mortgage fraud are the same, just with more sophisticated methods being used to find success.

For the entirety of mortgage lending there have been three kinds of mortgage fraud repeatedly utilized with varying types of financial institutional loss; they are as follows.

Fraud for Housing

This type of fraud continues to be very prevalent and, prior to the 2008 meltdown, was completely out of control. It is almost always committed by individual borrowers who know they don’t qualify for a property so they falsify, create and fabricate erroneous income and asset documents. The key to this type of fraud is the borrower rarely defaults, meaning they are rarely caught as there is little, if any, delinquency to investigate. However, it is still a federal crime punishable by up to 30 years in prison and a million dollar fine.

Fraud for Enhanced Profit

While I work with individual fraud testimony, I frequently find myself working in fraud for enhanced profit cases. These usually involve multiple people—including the loan officer, loan processor, the appraiser and even the underwriter—working within the industry to fund fraudulent loans. Comprised of multiple loans and the manipulation of credit profiles, appraisals, income data and assets, fraud for enhanced profit may even have straw buyers (individuals who buy the house in their name but never intend to occupy the property), who are paid for their participation. Sale prices and appraisals can be elevated, providing those involved with large amounts of windfall cash.

Straw buyer properties frequently default, and subsequent investigations can result in multiple arrests and convictions with significant sentences in federal prison. Convictions commonly include significant restitution which can destroy the rest of an individual’s life once they are released from prison. Again, the penalty is up to 30 years in prison and a million dollar fine per count! Since there are usually multiple properties linked, if convicted, perpetrators may be sentenced to a very long prison term.

Fraud for Criminal Conspiracies

While this type of fraud exists, I am rarely involved as an expert witness; however, if I do, I always work for the prosecution. This type of fraud is almost always committed to cleaning “dirty money” for criminal organizations. As such, their actions are almost always a violation of the Anti-Money Laundering Act. Transactions are always for cash and properties are usually sold immediately—not for profit, but just to “wash the money” and turn it into clean cash. These activities are numerous across the nation and much, but not all, of the money comes into the United States from foreign countries and their criminal element.

While the types of fraud repeat themselves, the manner and sophistication of the effort is constantly changing. Everyone needs to be on lookout for fraudulent mortgage and real estate activity. While the lure of easy money may tempt you, allowing yourself to become tangled in any of these fraud types will literally ruin your life.

That said, there are many who unsuspectedly find themselves being manipulated into mortgage fraud. If this happens, contact your attorney and encourage him to use a mortgage fraud expert to help you. With everything at stake, you need professional guidance. Without the right guidance, your future and time with your family will be ruined as your finances are destroyed and you wind up in prison!

Mortgage Defense knows mortgages. If you need help with your mortgage fraud case, contact us today. We can help find where you went wrong with your mortgage and provide expert witness testimony in your case. We can also offer attorney recommendations so you are able to get the help you deserve.