Mortgage fraud can involve borrowers or lenders, and in either scenario the penalties can be severe. Mortgage fraud is an umbrella term that involves a variety of scenarios where someone intentionally misrepresents facts that they know to be untrue.
People commit mortgage fraud whenever they omit or lie about important information that's relevant to a mortgage application, or to the approval process. It is possible to face prosecution for mortgage fraud by committing a single act, such as lying about one's income.
In this post, we will discuss "borrower fraud," and the penalties involved if it's prosecuted as a federal crime.
When Borrower's Commit Fraud
When an individual wants to take out a mortgage for a home loan, they have to fill out a mortgage application. If the borrower intentionally lies on an application, or misrepresents critical information, or omits important information intentionally, it is considered mortgage fraud.
In the legal field, this is known as "fraud for housing" because the borrower is not trying to make a profit by committing fraud, they are committing fraud so they can obtain a home loan. Mortgage fraud can be charged as a state or federal crime, depending on the state's laws and the facts of the case.
If mortgage fraud crossed state lines, involved a federally regulated lender, or if the Federal Housing Administration was involved, the case will usually be prosecuted in federal court. If the crime is prosecuted on the federal level, the borrower faces the following penalties:
- Up to 30 years in federal prison
- A fine up to $1 million (for a single count of mortgage fraud)
- Restitution to the lender
- Probation separately from, or in addition to fines and imprisonment
If you recently learned that you are being investigated for mortgage fraud, you need to contact a criminal defense attorney who's licensed to practice in the federal courts as soon possible.
Since each state prosecutes mortgage fraud differently, you need a local defense lawyer. You can search for local attorneys in our directory.