Mortgage Fraud

Mortgage fraud is a type of bank and wire fraud that targets lenders, borrowers, and professionals involved in the real estate and lending process. Because federally insured banks are almost always involved, federal prosecutors treat mortgage fraud as a serious felony offense.

What is Mortgage Fraud?

Mortgage fraud generally refers to making material misrepresentations on loan applications, appraisals, or closing documents in order to obtain a loan or larger financing than would otherwise be available.

Federal statutes commonly charged include:

  • Bank Fraud (18 U.S.C. 1344)—Schemes to defraud federally insured financial institutions.

  • Wire Fraud (18 U.S.C. 1343) and Mail Fraud (18 U.S.C. 1341)—False applications or communications transmitted electronically or by mail.

  • False Statements to Financial Institutions (18 U.S.C. 1014)—Knowingly making false statements for the purpose of influencing a bank’s lending decision.

  • Conspiracy (18 U.S.C 371)—Agreements between borrowers, brokers, or professionals to defraud lenders.

Common Mortgage Fraud Scenarios

  • Income Fraud: Inflating wages, employment, or tax returns to qualify for a larger loan.

  • Occupancy Fraud: Claiming a property will be a primary residence when it is intended as an investment.

  • Appraisal Fraud: Inflating property values through collusion with appraisals or brokers.

  • Straw Borrower Fraud: Using another person’s identity or credit to obtain a loan.

  • Equity Skimming/Flipping Schemes: Using false appraisals or shell buyers to extract equity from properties.

  • Professional Misconduct: Brokers, loan officers, or closing attorneys accused of falsifying documents to push loans through.

Why Mortgage Fraud Cases Are Serious

  • Felony Penalties: Each count of bank, wire, or mail fraud carries up to 20-30 years in prison depending on the statute.

  • Stacked Charges: Multiple transactions, applications, or closings can each be charged as separate counts.

  • Forfeiture and Restitution: Convictions often result in forfeiture of real property and restitution to lenders.

  • Reputational Harm: Professionals (brokers, attorneys, accountants) face license loss and civil suits in addition to criminal liability.

Mortgage fraud prosecutions can expose defendants to severe prison time, forfeiture, and reputational ruin. But not every misstatement is fraud—the government must prove willfulness, materiality, and intent.