I found this article while doing a search. I haven't read it all but what I have has been interesting.
It has given me some ideas for additional criminal claims in my complaint.
Maybe it will help someone.
Best from the Schmidt Family!
When the FBI Comes Calling…®
Unlike mail fraud, bank fraud, or wire fraud, mortgage fraud does not have its own federal statute associated with it. However, that definitely does not prevent the federal government from aggressively prosecuting the crime under the title of "mortgage fraud.". As is seen in Pasquantino v. United States, 125 S.Ct. 1766 (2005) (No. 03-725) (defendants convicted under the wire fraud statute for defrauding the Canadian government of excise taxes due on illegally imported liquor), Assistant United States Attorneys (hereinafter, AUSAs) will tie one of the existing fraud statutes to an act that is somehow fraudulent. Sometimes it will be the wire fraud statute, and other times it will be the bank fraud statute, the mail fraud statute, or any number or combination of other fraud statutes. Even other times, all that will be alleged is a conspiracy to commit mortgage fraud, which is also punishable by federal statute.
Mortgage fraud prosecution has increased in recent years due to low interest rates on home mortgages which make purchasing homes easier and more attractive, and as the housing market grows, we can expect even more mortgage fraud cases to be brought. One can only imagine what will happen if and when the housing market bursts and banks attempt to initiate foreclosures and recoup what they claim are losses.
Fraud is defined as a "knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment." Black's Law Dictionary 685 (8th ed. 2005). While fraud is usually a tort, and therefore a civil cause of action, when the conduct is willful, there may be criminal prosecution. Id. Mortgage fraud, therefore, while it has no official definition in Black's, can be defined as committing some sort fraudulent activity in conjunction with the mortgage process. Sometimes, when a person is investigated for an attempt to defraud, which is defined as "caus[ing] injury or loss to (a person) by deceit," id. at 456, there may be no actual loss or injury to another person during the investigation. This is one of the hardest things for a person who is being investigated to comprehend. Therefore, it is essential that people involved in any way in the real estate industry understand how the FBI investigates and classifies mortgage fraud and what has and has not been deemed to be fraud.
The FBI has recently ramped up efforts to investigate mortgage fraud, and it does so in two distinct categories: "Fraud for Profit," (hereinafter, FFP) and "Fraud for Housing," (hereinafter FFH). Federal Bureau of Investigation, Financial Crimes Report to the Public, D1 available here. According to the FBI, Fraud for Profit is sometimes referred to as "Industry Insider Fraud," and the motive here is to "revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties." Id. Apparently, nearly 80% of all reported fraud losses fall into the FFP category. FFH is different. It involves "illegal actions perpetrated solely by the borrower," and the motive in these types of cases "is to acquire and maintain ownership of a house under false pretenses," typically by a borrower "who makes misrepresentations regarding his income or employment history to qualify for a loan." Id. at D2.
The FBI claims that it is focusing its efforts on industry insiders, those who fall within the FFP category. Id. It sees rising trends in equity skimming, property flipping, and mortgage related identity theft. Id. Equity skimming schemes often "involve the use of corporate shell companies, corporate identity theft, and the use or threat of bankruptcy/foreclosure to dupe homeowners and investors." Id. Property flipping involves the purchase of properties "and artificially inflating their value through false appraisals. The artificially valued properties are then repurchased several times for a higher price by associates of the 'flipper.' After three or four sham sales, the properties are foreclosed on by victim lenders." Id.
The FBI has compiled a list of activities which it feels indicates mortgage fraud.
- Inflated Appraisals
- Exclusive use of one appraiser
- Increased Commissions and/or Bonuses by Brokers and Appraisers
- Bonuses might paid (outside or at settlement) for fee-based services
- Broker or appraiser might receive higher than customary fees
- Falsifications on Loan Applications
- Buyers instructed how to falsify the mortgage application
- Buyers requested to sign blank application
- Fake Supporting Loan Documentation
- Buyer requested to sign blank employee or bank forms
- Buyer requested to sign other types of blank forms
- Purchase Loans Disguised as Refinance
- Purchase loans that are disguised as refinances typically require less documentation or might be scrutinized less by the lender
- Short Term Investments with Guaranteed Re-Purchase
- Investors might be used to flip property prices for a fixed percentage
- Multiple "Holding Companies" might be utilized to increase property values. Id. at D9-D10.
It has also described the various types of schemes it sees in mortgage fraud cases.
- Property Flipping
- Property is purchased, falsely appraised at a higher value, and then quickly sold. What makes this practice illegal is that the appraisal information is fraudulent. The schemes typically involve one or more of the following: fraudulent appraisals, doctored loan documentation, inflated buyer income, etc. Kickbacks to buyers, investors, brokers, appraisers, or title company employees are common in this scheme. In this type of scheme, a home worth $20,000 may be appraised for $80,000 or higher.
- Silent Second
- The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, the funds are borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender.
- Nominee Loans
- The identity of the borrower is concealed through the use of a nominee (also known as a Straw Buyer) who allows the borrower to use the nominee's name and credit history to apply for a loan.
- Fictitious or Stolen Identity
- A fictitious or stolen identity may be used on the loan application. The applicant may sometimes be involved in an identity theft scheme. In such a scheme, the applicant's name, personal identifying information and credit history are used without the true person's knowledge.
- Inflated Appraisals
- An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender. The report inaccurately states an inflated property value.
- Foreclosure Schemes
- The perpetrator identifies homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure. Perpetrators mislead the homeowners into believing that they can save their homes in exchange for a transfer of the deed and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner.
- Equity Skimming
- An investor may use a straw buyer, false income documents, or false credit reports, to obtain a mortgage loan in the straw buyer's name. Subsequent to closing, 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. The investor does not make any mortgage payments and rents the property until foreclosure takes place several months later.
- Air Loans
- This is a non-existent property loan where there is usually no collateral. An example of an air loan would be where a broker invents borrowers and properties, establishes accounts for payments, and maintains custodial accounts for escrows. They may set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency, etc., for verification purposes. Id. at D10-D11.
Mortgage Fraud Continued-->