What Are the Potential Penalties for Mortgage Fraud?

Mortgage Fraud

Did you know that 1 in 120 mortgage applications contain fraud? In 2021, the risk of penalties for mortgage fraud grew over 37 percent.

Are you selling your home? Do you understand mortgage fraud laws and how to avoid penalties? Are you being investigated or charged with mortgage fraud?

The following guide will explain what mortgage fraud is and how to prevent it. This brief guide will also cover mortgage fraud penalties and what to do if you’re charged with mortgage fraud.

What Is Mortgage Fraud?

There are several types of mortgage fraud that exist. The six most common types of fraud are false identity, asset rental, equity skimming, inflated appraisals, foreclosure scams, and property flipping.

Asset rental is a fraud that occurs when someone borrows money from others to make themselves look qualified for financing.

Inflated appraisals involve making a home’s value seem more than it really is. Appraisers get caught up in this type of fraud when borrowers need a higher loan amount.

Equity skimming involves an investor using a straw buyer to apply for a loan with false information. The buyer signs the property over after the loan closes. The investor then rents out the property until it’s foreclosed.

Foreclosure scams occur when the scammer promises to re-mortgage a home to save it from foreclosure but doesn’t actually save it.

Another form of fraud is using a false identity or credit history to apply for a loan. The person on the loan may be in on the fraud, or it could also be identity theft.

Property flipping is buying a property, fixing it, and reselling it for a higher price. However, this is common and not illegal unless using falsified documents when buying the property.

Penalties For Mortgage Fraud

Mortgage fraud at the state level could result in large fines, restitution charges, and incarceration. Mortgage fraud at the federal level results in even heavier fines and prison sentences.

Fraudulent lenders, brokers, and other real estate professionals could face suspension or lose their licenses.

Probation is also a possibility and terms are for at least one year but usually last longer. It involves routine check-ins with an officer, court-mandated requirements, drug tests, and avoiding all criminal activity.

What To Do if Charged

You must contact a mortgage fraud lawyer immediately if you’re being investigated or charged. you will then discuss your rights, potential defenses, and case strategies.

If law enforcement has contacted you about a real estate transaction it means you’re under investigation. You will save money and potential jail time by acting fast. Most consultations are completely free.

Mortgage Fraud Prevention

Only use trusted referrals for property purchases. Only sign documents you’re comfortable with and fully understand.

Review tax assessments for true property values and check what other homes in the area have sold for.

Don’t ever borrow more money than you’re able to pay back. Also, check the home’s sale history for suspicious activity.

Understanding Mortgage Fraud

Now you know what mortgage fraud is and the penalties for mortgage fraud. You also know what to do if charged and how to prevent fraud from happening in the first place.

The risk of mortgage fraud is steadily growing in today’s housing market so remember to always read the fine print and make responsible decisions.

Please browse our site for more law information and helpful tips.

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