Mortgage fraud has consistently been a subject of significant scrutiny. As financial systems become more complex and interconnected, the opportunities for dishonest practices rise proportionately. In the state of New Jersey, legislators have taken stringent measures to deter these illicit activities by imposing severe penalties. If you, or someone you know, are facing allegations of mortgage fraud, it is crucial to understand the legal repercussions and consider seeking counsel.
What is Mortgage Fraud?
Mortgage fraud refers to an intentional act of misrepresentation, omission, or misinformation during the mortgage application and approval process. The primary aim of such fraud is typically to secure a loan amount or terms that would otherwise be unattainable were the true information known. There are multiple types of mortgage fraud, and it can be perpetrated by both borrowers and industry professionals. Here are the main categories:
- Fraud for Housing: This involves borrowers who provide false information to secure a loan, often with the intention of buying a home. This can include inflating one’s income or assets, providing a false employment history, lying about occupancy status (claiming a property will be owner-occupied when it is intended for rental or investment), or hiding liabilities.
- Fraud for Profit: This is typically more sophisticated and involves industry professionals, such as mortgage brokers, real estate agents, appraisers, and other related professionals. The aim here is usually not to secure housing but to misuse the mortgage lending process to steal cash and equity from lenders or homeowners. Common schemes include:
- Property Flipping: Buying properties and artificially inflating their value through false appraisals. The inflated value is then used to obtain mortgages, with the fraudster walking away with the loan money.
- Straw Buyers: Using another person’s information, usually with their consent, to secure a mortgage the actual buyer wouldn’t qualify for.
- Silent Second: When the buyer borrows the down payment for the property from the seller through an unsecured loan. This is fraudulent when the lender is unaware and believes the borrower has invested their money.
- Equity Skimming: An investor uses a straw buyer, false income documents, and false credit reports to obtain a mortgage loan. Once the loan is closed, the straw buyer signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title.
- Occupancy Fraud: When a borrower claims they will occupy a home (which usually gets a better rate and lower down payment) but intends to use it as an investment property or rental.
- Income Fraud: Misrepresenting the amount or source of income to qualify for the loan.
- Appraisal Fraud: When a home’s value is deliberately appraised higher or lower than what it’s worth.
- Transaction Fraud: Misrepresenting the nature of the transaction, such as undisclosed agreements between parties.
- Identity Theft: Applying for a mortgage using someone else’s personal information.
Mortgage fraud has severe consequences. It can lead to loan defaults, foreclosures, decreased housing values, and even contribute to larger economic downturns. On an individual level, those who commit mortgage fraud can face criminal penalties, including fines and imprisonment.
Penalties at the State Level
The state of New Jersey has been active in combatting mortgage fraud through its comprehensive legal statutes. Being convicted at the state level can result in:
- Imprisonment: For crimes considered as first-degree offenses, perpetrators can face between 10 to 20 years in prison. Lesser degrees of the offense might result in shorter sentences, but imprisonment is a very real possibility.
- Fines: Depending on the severity and the amount involved in the fraud, fines can be colossal, running up to hundreds of thousands of dollars.
- Restitution: The courts may order offenders to pay back the amounts involved in the fraud. This is over and above any fines that may be levied.
- Probation: In some cases, especially if it’s a first-time offense or if the amounts involved are minimal, the court may consider probation, which comes with its own set of terms and conditions.
Mortgage fraud doesn’t just draw the attention of state authorities; federal agencies are also on the lookout for such discrepancies. Convictions at this level can be even more daunting:
- Federal Imprisonment: Mortgage fraud is typically considered a felony at the federal level. Convictions can lead to up to 30 years in federal prison, especially if the fraud involves a federally insured financial institution.
- Hefty Fines: Convicts can be slapped with fines up to $1 million.
- Additional Charges: The nature of mortgage fraud often means that those involved might be liable for other charges such as wire fraud, bank fraud, or money laundering, each coming with its own set of penalties.
Apart from criminal penalties, those convicted of mortgage fraud might also face civil lawsuits. These can result in:
- Punitive Damages: These are meant to punish the offender and deter similar future actions.
- Compensatory Damages: These are meant to compensate the injured party for any actual damages suffered.
The Importance of Legal Representation
The complexities surrounding mortgage fraud, coupled with the dire consequences of a conviction, make it imperative to seek experienced legal counsel. At Rudnick, Addonizio, Pappa & Casazza PC, our team of dedicated legal professionals has extensive experience in handling mortgage fraud cases. We believe in a proactive approach, meticulously examining every detail of your case to ensure your rights are protected.
Contact an Experienced Criminal Lawyer at Rudnick, Addonizio, Pappa & Casazza PC for a Free Consultation About Your Case Today
Mortgage fraud is taken very seriously in New Jersey, with both state and federal authorities aggressively pursuing perpetrators. The penalties can be life-altering, involving long prison sentences, hefty fines, and damaging civil lawsuits.
If you are under investigation or have been charged with mortgage fraud, the best course of action is to seek knowledgeable and experienced legal representation immediately. At Rudnick, Addonizio, Pappa & Casazza PC, we stand ready to be your stalwart defenders, ensuring that you are afforded every legal protection available. Remember, a charge is not a conviction, and with the right legal team by your side, you can navigate these challenging waters with confidence.