Anyone who has ever applied for a residential or commercial mortgage knows that a lot of information must be provided before an approval is given. Even with the vast amount of time and effort that goes into the application process, there is room for fraudulent actions to take place. In fact, there is more than one kind of mortgage application fraud. Here is some information on how this type of activity comes about, the possible courses of action related to proving that fraud did occur, and how it can impact those involved in the years to come.
More Than One Kind of Mortgage Fraud
Unlike some other types of crimes, it’s possible for more than one party involved in an application to commit fraud. Most people immediately think of applicants who seek to circumvent the process in order to either secure a mortgage that would not normally be approved, or massage the information provided in order to obtain a larger amount than would be possible otherwise.
Another approach to mortgage application fraud originates with someone other than the applicant. For example, a real estate professional may misrepresent the value of the property in order to increase the odds of finding financing for a sale. This allows the professional to unload a property that has been on the market for some time and secure a commission off that sale.
Others may also be involved in the commission of application fraud. Along with applicants and real estate agents, mortgage brokers and real estate appraisers may provide information that’s untrue or omit relevant data in order to generate some type of personal gain.
What are Some of the Indicators That Fraud is Taking Place?
There are a few factors that indicate the potential for fraud. Information that seems to be incongruous with other data found on the application and seems to paint the financial position of the buyer in a better light is one example. Choosing to omit data that could lower the odds of being approved for a mortgage is another common occurrence. Withholding information while promising to provide it later and then never following through also serves as a sign that something is not as it should be.
What are the Penalties for Committing Mortgage Application Fraud?
Cases in which this type of fraud can be proven are covered under the terms of the Fraud Enforcement and Recovery Act of 2009. As federal law, the provisions of this act are in force across the country. At the state level, judges are responsible for issuing decisions that are in compliance with the specifics found in FERA.
In the state of New York, judges also take a close look at the circumstances surrounding the fraud. The goal is to determine if the responsible party chose to include false data or omit factual information for the purpose of being able to have a roof over his or her head. The judge will also seek to determine if the reason for the fraudulent actions were clearly to generate some type of profit. The penalties are stiff for either reason, but courts tend to be more severe when the fraud was done with an eye toward making more money than the deal would normally merit.
A conviction will mean incurring fines of as much as $100,000.00 USD. Depending on the circumstances, there is the possibility of being sentenced to prison for as long as 30 years. While the individual may be eligible for parole after a time, spending years behind bars is often enough to make people think twice about committing this type of fraud.
Mounting a Defense
For mortgage applicants, the first line of defense is to demonstrate that the omission or other issues with the application were not intentional. Instead, those details were not included because the applicant overlooked them while attempting to compile other data also needed for the application process. Typically, judges will determine that if it is not possible to establish premeditated intent to falsify the information included on the application, any charges of fraud will be dismissed.
Given the serious nature of a charge of mortgage application fraud, it’s important to seek legal counsel as soon as any claims of fraud arise. By cooperating fully with the lawyer, it’s possible to determine the best way to prepare a defense and ensure that the rights of the client are protected throughout the legal proceedings.