New York Federal Mortgage Fraud

Mortgage fraud is generally defined as the use of a material misstatement, misrepresentation or omission intended to be relied upon by an underwriter or lender to fund, purchase or insure a loan, and is typically prosecuted in federal courts using the mail fraud  (18 U.S.C. § 1341), wire fraud(18 U.S.C. § 1343) and bank fraud (18 U.S.C. § 1344) statutes of the United States Code.

While prosecutions for mortgage fraud were historically rare in the United States, they have become commonplace in the last decade since the enactment of the Fraud Enforcement and Recovery Act (FERA) in 2009. FERA both increased the funding for federal law enforcement officers to investigate and prosecute mortgage fraud schemes, and expanded the scope of the bank fraud statute so that it applied to mortgage frauds regardless of whether the lender was insured by, or received funding from the federal government. See United States v. Bouchard, 828 F.3d 116, 127 (2d Cir. 2016). This is important as a conviction for bank fraud may be punished by up to 30 years imprisonment, while a conviction for mail or wire fraud may be punished by a maximum of 20 years imprisonment. Additionally, FERA amended the five year statute of limitations generally applicable to federal fraud cases (18 U.S.C. § 3282) – and increased it to 10 years, allowing prosecutors to secure convictions for much older mortgage frauds. See 18 U.S.C. § 3293.

Federal investigators generally categorize mortgage frauds into two types of cases. Traditional mortgage frauds – known as frauds for housing – occur when a borrower submits false, incomplete or inaccurate information in order to qualify for a loan or to obtain more favorable terms. This may be accomplished by the borrower simply making false statements as to his income, assets or liabilities on a loan application. The other type of frauds – known as frauds for profit – occur when a real estate professional, e.g., a mortgage broker, real estate agent, developer or appraiser, commits fraud upon a financial institution in order to extract money from a property or a transaction. There are a number of schemes in which a fraud for profit may take place: 1) foreclosure rescue scams wherein aid is offered to an economically stressed homeowner in order to skim off equity from the property; 2) predatory loan modification scams; 3) illegal property flipping via fraudulently high appraisals; 4) schemes fraudulently utilizing straw purchasers; and 5) reverse mortgage scams. Any of these frauds may be charged under FERA’s expanded definition of bank fraud and be punished by up to thirty years imprisonment and a $1 million fine.

In the wake of the most recent financial crisis and the enactment of FERA, any allegations of mortgage fraud should be taken extremely seriously. Should you be contacted by a law enforcement officer concerning an alleged mortgage fraud, you should decline to answer any questions until you have retained and consulted with a New York federal crimes attorney. Mortgage fraud lawyers at the Law Offices of Jeffrey Lichtman have successfully handled several federal mortgage fraud cases, exploiting holes in the prosecution’s evidence to achieve the best possible result for our clients. Contact us today at (212) 581-1001 for a free consultation.

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