During the housing boom of the early 2000s, North Carolinians along with the rest of the nation, scrambled to invest in real estate. As home values continued to steadily increase, purchasing a home was considered one of the most sound and smartest ways to invest money. However, during the mid-2000s as the housing bubble began to burst, millions of U.S. homeowners were suddenly strapped with underwater mortgages and facing foreclosure.
In light of investigations and reports of questionable borrowing and lending practices, the Fraud Enforcement and Recovery Act was passed in 2009. Today individuals convicted of criminal charges related to mortgage fraud face stiff fines and penalties. Prior to the enaction of FERA, borrowers, appraisers and lenders were allowed to engage in practices that are today considered illegal. It's important, therefore, to understand what types of financial transactions and activities may be considered mortgage fraud.
An individual who wishes to purchase a home or property may face mortgage fraud charges if he or she produces false financial documents in order to qualify for a bigger loan or a special housing program. For example, altering or submitting inflated W-2 forms or paychecks is illegal. In another example, an individual may take out a second loan to pay the down payment that's required under the terms of a first loan. This too is considered illegal as the transaction occurs without the initial borrower’s knowledge or approval.
In other cases, acts of mortgage fraud may be carried out by financial professionals who stand to profit such as lenders, appraisers, mortgage brokers or loan officers. An example of an act of mortgage fraud for profit includes cases in which an appraiser produces an inflated appraisal for the benefit of a loan officer who profits from closing the deal.
As the U.S. government continues to enforce more restrictive laws and regulations related to the purchase, appraisal and sale of real estate; individual buyers and financial professionals must exercise caution. In cases where an individual has questions or is facing criminal charges related to mortgage fraud, it's wise to seek the advice and counsel of a criminal defense attorney.
Source: FindLaw.com, "Mortgage Fraud," 2014