Mortgage Fraud Prosecutions In Usa
β What is Mortgage Fraud?
Mortgage fraud is a type of financial crime involving the misrepresentation, misstatement, or omission of information on a mortgage loan application to obtain a loan or a larger loan amount than would be approved legitimately.
π§Ύ Types of Mortgage Fraud
Fraud for Housing: When a borrower provides false information to qualify for a home loan (e.g., fake income, employment).
Fraud for Profit: Involves industry insiders (brokers, appraisers, bankers) conspiring to extract money from mortgage lending institutions or homeowners.
Straw Buyer Schemes
Property Flipping with Inflated Appraisals
Foreclosure Rescue Scams
Equity Skimming
π Key Federal Statutes Used in Prosecutions
18 U.S.C. Β§ 1341 β Mail Fraud
18 U.S.C. Β§ 1343 β Wire Fraud
18 U.S.C. Β§ 1344 β Bank Fraud
18 U.S.C. Β§ 1001 β False Statements
18 U.S.C. Β§ 1014 β False Statements to a Financial Institution
18 U.S.C. Β§ 1956 β Money Laundering
Prosecutors often charge mortgage fraud as part of a larger financial crimes case, including conspiracy, racketeering, and identity theft.
βοΈ Detailed Case Law Examples
Case 1: United States v. Quintero-Lopez (2010)
Facts: Quintero-Lopez was a real estate investor who conspired with brokers and appraisers to inflate property values and falsify borrower information.
Legal Issues: Charged with wire fraud and conspiracy to commit bank fraud.
Outcome: Convicted; sentenced to over 10 years in prison and ordered to pay millions in restitution.
Significance: Demonstrated aggressive federal prosecution of fraud-for-profit schemes, especially when multiple actors collude.
Case 2: United States v. Selby (2009)
Facts: Mortgage broker Selby submitted falsified loan applications for unqualified borrowers, using fake documents and inflated income.
Charges: Wire fraud and making false statements to financial institutions.
Outcome: Convicted and sentenced to 8 years.
Significance: Emphasized the responsibility of mortgage professionals to vet applications and the legal consequences of falsifying loan documents.
Case 3: United States v. Barksdale (2013)
Facts: Barksdale recruited straw buyers to purchase homes and then diverted the loan proceeds for personal use.
Charges: Bank fraud, wire fraud, and conspiracy.
Outcome: Convicted after trial; sentenced to 12 years in federal prison.
Significance: Highlighted how use of straw buyers to obtain loans fraudulently is a serious federal crime, especially when involving multiple transactions.
Case 4: United States v. Jackson (2015)
Facts: Jackson, a real estate agent, and others were involved in a flipping scheme where they bought properties, inflated values, and sold them at higher prices using falsified appraisals.
Legal Issues: Conspiracy to commit wire and bank fraud.
Outcome: Pleaded guilty; significant restitution ordered.
Significance: Showed how appraisers, agents, and lenders can all be liable when manipulating property values for fraudulent profits.
Case 5: United States v. McCandless (2011)
Facts: McCandless, a loan officer, submitted dozens of loans using falsified employment and income verification documents.
Charges: Bank fraud and identity theft.
Outcome: Convicted; served over 7 years.
Significance: Reinforced the federal government's targeting of mortgage professionals abusing their positions to perpetuate fraud.
Case 6: United States v. Ferguson (2017)
Facts: Ferguson posed as a foreclosure rescue consultant, collecting fees from distressed homeowners and promising to modify their loans β but did nothing.
Legal Issues: Charged with mail fraud, wire fraud, and making false promises.
Outcome: Convicted; ordered to pay restitution to over 100 victims.
Significance: Addressed foreclosure rescue fraud, which preys on vulnerable homeowners and is aggressively prosecuted.
Case 7: United States v. Fields (2014)
Facts: Fields created shell companies to receive proceeds from fraudulent mortgage closings. He laundered the money through various accounts.
Charges: Money laundering, wire fraud, and conspiracy.
Outcome: Convicted; sentenced to 10 years and forfeiture of illegal profits.
Significance: Demonstrated how laundering mortgage fraud proceeds adds significant criminal exposure and leads to asset forfeiture.
Case 8: United States v. Riddle (2008)
Facts: Riddle, a real estate developer, was accused of inflating income on borrower applications and bribing appraisers.
Outcome: Pleaded guilty to conspiracy and wire fraud.
Significance: Common example of developer-led fraud schemes during the housing bubble, leading to criminal liability even when banks donβt immediately suffer losses.
π Legal Takeaways
Intent and Knowledge: Prosecutors must prove the defendant knowingly made false statements or committed fraudulent acts.
Professional Culpability: Mortgage brokers, appraisers, and loan officers face heightened scrutiny due to their access to sensitive financial documents.
Straw Buyers: The use of fake buyers or identity theft is a red flag that increases penalties.
Pattern of Fraud: Repeat fraudulent transactions often lead to conspiracy charges, increasing sentencing exposure.
Sentencing Enhancements: Larger financial losses, number of victims, or abuse of trust roles can trigger enhanced federal sentences under the U.S. Sentencing Guidelines.
βοΈ Conclusion
Mortgage fraud remains a serious federal offense, especially following the 2008 financial crisis. Courts continue to impose substantial penalties for schemes involving:
Falsified loan documents
Inflated appraisals
Straw buyers
Misuse of rescue services
Money laundering of loan proceeds
The cases above demonstrate that courts evaluate the scope of fraud, role of the defendant, and harm to financial institutions when determining guilt and punishment.
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