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Mortgage fraud may be committed by either the borrower or the lender, and involves intentional omissions or fraudulent claims on a mortgage application. The main complication in prosecuting mortgage fraud is proving whether errors in the person's mortgage application were intentional or simply honest mistakes. Before the housing market imploded, these charges were rare, because proving intent is so difficult. In recent years, however, instances of mortgage fraud charges have increased.

States vary substantially in how they prosecute mortgage fraud, and some states have no actual laws against it on record, though they do have laws pertaining to specific activities inherent in this type of fraud.

What Constitutes Mortgage Fraud?

Mortgage fraud comes in many flavors, and may involve anyone involved in the mortgage process. If the accused works for the lender, it is considered mortgage broker fraud. Other types include income mortgage fraud, straw buyer fraud, and commercial mortgage fraud.

With so many parties involved in a mortgage transaction, opportunities to commit fraud are abundant. Common schemes include:

• Hiding the identity of the true buyer by using the name and credit history of another (called a straw buyer)
• Obtaining an inflated appraisal to match a potential buyer's offer
• Purchasing a property, obtaining a false appraisal that inflates its value, and then quickly reselling it
• Submitting fraudulent supporting loan documentation
• Taking out a second loan to cover the down payment without informing initial lender
• Using a straw buyer to purchase a property, using false documentation (credit and income reports), and then signing over the property to another who then rents the property out without ever making a payment (referred to as Equity Skimming)

What are the Federal Penalties for Mortgage Fraud?

Penalties vary widely, depending on the amount of money involved, prior criminal background, and whether the defendant faces state or federal charges. Common penalties include prison, probation, fines, and restitution.

Under a federal conviction, the maximum prison sentence is 30 years. Probation may be levied in lieu of or in addition to a prison sentence. Terms typically last 12 months and require meeting special requirements, such as reporting to a probation officer and remaining crime-free.

Fines may be substantial, especially for professionals convicted of mortgage fraud. The maximum fine is $1 million. In addition to fines, expect to pay restitution to the lender.

What are the Penalties for Mortgage Fraud in Arizona?

Arizona classifies mortgage fraud as a Class 2 felony.

• First offense: Punished by probation plus up to 1 year in jail OR up to 12.5 years in prison
• Second offense: Punished by between 4.5 years and 23.25 years in prison
• Three or more offenses: Punished by between 10.5 years and 35 years in prison.

Probation is not available if the benefit received for the fraud exceeds $100,000.

What are the Penalties for Mortgage Fraud in Ohio?

Ohio has two separate categories for mortgage fraud: fraud for housing and fraud for profit. The first is committed by the buyer while the second is committed by mortgage professionals. Fraud for profit is charged and prosecuted far more often, as proving fraud for housing is extremely difficult.

Penalties for both include:

• Prison sentence between 5 and 30 years unless the benefit received is less than $1,000 (rare with mortgage fraud), in which case the maximum sentence is 1 year
• Probation of at least 12 months
• Fines up to $1 million for felony convictions, $100,000 for misdemeanor convictions
• Restitution to the mortgage lender

What are the Penalties for Mortgage Fraud in New Jersey?

The state of New Jersey typically prosecutes mortgage fraud as theft by deception, or money laundering, depending on circumstances.

Theft by deception includes deception for financial benefit, failure to correct a false impression, or deception through exaggeration. Money laundering is possessing or transporting knowing acquired illegally.

New Jersey prosecutes based on the amount of money involved in the fraudulent activity.

Theft by Deception:

• $75,000 or less: Incarceration between 3 and 5 years; fines up $15,000
• $75,000 or more: Incarceration between 5 and 10 years; fines up to $150,000

Money Laundering:

• $75,000-$500,000: Incarceration between 5 and 10 years; fines up to $150,000
• $500,000 or more: Incarceration between 10 and 20 years; fines up to $200,000

Schedule a Free Consultation

If you were arrested for mortgage fraud, schedule a free consultation with a criminal defense attorney. He or she will discuss the unique features of your case and help determine next steps.

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