Mortgage Fraud Cases
The bursting of the real estate “bubble” here in Georgia and other states has resulted in many investigations that focus on people involved in the real estate business. Investigations and prosecutions have been brought against mortgage bankers, brokers, lenders, real estate agents, property appraisers, and even people who purchase property. The majority of these cases end up in federal court, but we have seen a few handled in the State Courts of Georgia, using a recently enacted law.
In the years leading up to the real estate crash, we saw Mortgage Fraud schemes that were dominated by “straw purchases”, and similar strategies. In these cases, the seller (often in cahoots with the lender) would pump up the price of a property. They would find a “straw purchaser”, a person who had good credit and who would qualify for an easy loan to buy the property at the inflated value. The bank loan for the inflated value would more than cover the original cost, and was usually enough to spread around to the various players in the scheme; brokers, real estate agents, the seller, and sometimes even the lawyer who closed the deal or the appraiser. Banks no longer hand out money for such “easy” loans, so mortgage fraud schemes have changed a bit.
Many schemes have tried to profit when homeowners are in foreclosure or at risk of defaulting on their mortgage loan. These schemes involve a practice of falsely telling the homeowners that they can save their homes by transferring the deed or putting the property in the name of an investor. The schemers then sell the property to an investor or straw borrower, and sometimes even steal the seller proceeds or fees paid by the homeowners. Other versions of this crime occur when homeowners are told they can pay rent for at least a year and repurchase the property once their credit has been reestablished. However, the schemers never made any of the intervening mortgage payments and usually the property goes into foreclosure.
We also have seen more and more loan modification schemes, in which the schemers claim they will assist homeowners who are delinquent in their mortgage payments and are on the verge of losing their home by offering to renegotiate the terms of the homeowners’ loan with the lender. The people running such operations usually ask for large fees up front and often negotiate unfavorable terms for the clients. Quite often, the homeowners lose their property.
Property flipping schemes are still around, still being investigated, and still being prosecuted. In these schemes, someone buys property, there is a bogus appraisal at a higher value, and then the real estate is quickly sold. Flipping property in this way can be illegal if there is proof that the appraisal information was fraudulent, and that those involved in the deal knew it was bogus. The schemes often involve inflated and fraudulent appraisals, falsified loan documentation, inflated buyer income, and kickbacks paid to buyers, investors, property/loan brokers, appraisers, and title company employees.
Owners of distressed commercial real estate also have been known to engage in mortgage fraud. Some desperate commercial real estate investors have been prosecuted for creating bogus leases and using these fake leases to exaggerate the building’s profitability. The property owner then gets an inflated appraisal, using the income method approach. These false leases and appraisals make the bank or other lender believe the property is commercially viable, and thus induce the lender to extend a loan to the owner. What often happens is that cash flow is not as good as projected, leading to neglected maintenance and repairs. If and when the commercial loans goes into default, the lender is oftentimes left with run-down commercial property that cannot be used or is difficult to lease out.
These are just a few of the many types of mortgage fraud schemes that we see investigated and prosecuted. However, not everyone involved in real estate is a criminal. There are many legitimate loan modification programs, and such, so simply because a person lost his property, that does not mean that everybody they dealt with is a criminal.
No matter what variety of mortgage fraud case is being considered, a person facing these type of charges should consult with and obtain the services of a lawyer experienced in how these matters are handled. Mortgage fraud cases are usually document intensive and, for the most part are very complicated. Much of the evidence and quite a few documents are originally obtained by federal prosecutors who will sometimes use grand jury subpoenas and search warrants to gather the evidence in these types of federal cases. Many mortgage fraud cases involve multiple Defendants, thus adding an extra level of complexity to the defense attorney’s job.
Any person or company that is under investigation or being actively prosecuted for mortgage fraud should make sure to obtain the services of an attorney who is qualified to handle these complicated cases. At Kish & Lietz, we have handled mortgage fraud matters on many occassions, and we have been doing so for many years. If you or a loved one is facing a mortgage fraud matter, we would be glad to speak with you. Feel free to call (404) 588-3991, or contact us online.