MORTGAGE FRAUD AND BANK FRAUD

As an attorney in federal court for 17 years, 13 of them in court every day as a felony trial attorney with the Federal Public Defender, I fought very hard on many cases of alleged fraud, including mortgage and bank fraud. Trying these cases in front of juries and arguing their merits to judges in federal court taught me a lot about mortgage fraud. I didn’t just sit in an office and review files. Based upon that experience, I am writing this as a quick primer for others as this area of prosecution –mortgage fraud--becomes the “flavor the month” in federal court. My firm has already been called just recently to rush to the defense of a few who have unjustly been accused of mortgage fraud. Many charges of mortgage fraud arise when Suspicious Activity Reports (SARs) are filed by federally-insured financial institutions and Department of Housing and Urban Development Office of Inspector General (HUD-OIG) reports. I have experience in that area.

 

What is going on? Because of the perceived “fleecing” of the banks in this country, and with a sinking economy, a priority in federal prosecution in all districts across the nation (including Sacramento) now is mortgage and bank fraud. While mortgage and bank fraud have indeed been federal crimes on the books for decades, the Department Of Justice knows in 2008 that making mortgage and bank fraud prosecutions a high priority will satisfy America’s need to point the finger at someone and lay the blame at their feet for a sluggish economy and increased national debt. Not all real estate deals and investments that do not pan out are mortgage fraud, however. Indeed, there are many defenses to mortgage fraud charges.

 

However, as with all zealous prosecutions attempted in the haste of a public outcry by the Justice Department, attorneys representing defendants charged with mortgage and bank fraud must remain vigilant to ensure that a crime has been committed, and that the alleged mortgage or bank fraud is not simply an honest attempt to invest, perhaps risky, but with no intent to defraud anyone, nor hurt the nation’s economy.

 

Mortgage fraud is commonly prosecuted under these statues:
18 U.S.C. § 1001 - False misleading statements or entries generally
18 U.S.C. § 1010 - HUD and Federal Housing Administration Transactions
18 U.S.C. § 1014 - False misleading loan and credit applications generally
18 U.S.C. § 1028 - Fraud and related activity in connection with identification documents
18 U.S.C. § 1341 - Frauds and swindles by Mail
18 U.S.C. § 1342 - Fictitious name or address
18 U.S.C. § 1343 - Fraud by wire
18 U.S.C. § 1344 - Bank Fraud
42 U.S.C. § 408(a) - False Social Security Number

 

In January 2008, according to the FBI, mortgage fraud convictions in the USA have over doubled in the last year. The list of offences include falsifying of mortgage application documents by brokers and lenders… in the hope that the customer would take out too big a loan, thus earning bigger fees. (Because of securitization in the States, the company that “lends” the mortgage seldom ends up “holding the loan” - the loans are sold off to outside investors.) USA Today reports that in the last year, “The FBI created 34 mortgage fraud task forces and working groups with investigators from departments including Housing and Urban Development, Treasury and Veterans Affairs.”
Admittedly, some of us might even know someone who has—either without our knowledge or against our advice—made misrepresentations on their mortgage applications. In the end, to have the bank repossess your house is bad enough, but to have the FBI haul you off for federal mortgage fraud feels worse. It’s going to be interesting to see whether other countries, like the UK government, put together a task force for some “trophy prosecutions”.

 

What is mortgage fraud? 
Click here to know what is mortgage fraud.

 

The FBI has created special alerts:

Click here to view FBI Flyer Special Alert on Mortgage Fraud
Click here to view FBI “fact sheet” on what to look for with mortgage fraud
Recent mortgage fraud cases, including Sacramento, are discussed here

Click here to view answers to frequenlty asked questions and potential defense strategies.



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