29 Sep 23

Boston Federal Defense Against Mortgage and Bank Fraud

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Last Updated on: 11th October 2023, 11:18 am

Boston Federal Defense Against Mortgage and Bank Fraud

Mortgage fraud is a big problem in Boston. Lots of people get accused of lying on mortgage applications or documents. This can lead to criminal charges from the federal government. But there are good defenses people can use.

One defense is if you made an honest mistake. For example if you thought a document was correct when you signed it. Then later the bank says it had wrong info. That doesn’t mean you committed fraud. You have to intend to defraud the bank, not just make a mistake.

Another defense is if you relied on someone else’s advice. Like if your mortgage broker or lawyer told you to sign something or put certain info down. You can argue you didn’t have intent to defraud because you trusted the expert helping you.

You can also argue the bank wasn’t really harmed. For fraud you have to show the victim lost money. If the bank didn’t lose anything then there’s no fraud. Even if your documents had mistakes the bank has to prove it relied on that and lost money as a result.

A technical defense is the bank didn’t follow proper procedures. There are lots of complex rules banks have to follow when they approve mortgages and foreclose on homes. If they didn’t follow the rules you can argue the documents are invalid. That means you shouldn’t be charged with fraud.

One of the best defenses is going after the bank’s credibility. Big banks like Bank of America have done shady things. You can argue they are just blaming customers like you instead of taking responsibility.

You can also bring up how banks contributed to the housing crisis in 2008. They gave loans to people who couldn’t afford it and manipulated mortgage securities. So they are partly responsible for their own losses.

It helps to have a lawyer who really understands banking and mortgages. The cases involve complicated financial documents. You need someone experienced with these federal white collar cases. They can analyze the evidence and build a defense strategy.

Let’s look at some specific defenses people have used:

Reliance on Professionals

In U.S. v. Reynoso the defendant argued he relied on his lawyer’s advice when applying for mortgage loans. He said the lawyer prepared the documents and told him what to sign. This helped show he lacked intent to commit fraud.

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The court agreed this was a valid defense. But the defendant still has to show he fully disclosed everything to the lawyer. And that he truly believed the documents were all accurate when he signed them.

Bank Didn’t Follow Procedures

In Federal Home Loan Bank of Boston v. Ally Financial, Ally argued the bank didn’t follow proper procedures when it bought mortgage securities. This meant it couldn’t prove the securities were fraudulent.

The court agreed the bank failed to properly examine the mortgage securities before buying them. This hurt its ability to show fraud later on. Proper due diligence by the bank may have prevented its own losses.

Honest Mistake

In U.S. v. Maxwell the defendant claimed any misstatements on his mortgage application were an honest mistake. He didn’t intend to defraud the bank.

The court said this defense requires showing normal human carelessness, not gross recklessness. Just making a mistake isn’t enough – you have to show diligent effort to provide correct information.

Maxwell failed to provide evidence he used care in completing the application. So the court rejected his defense.

No Financial Harm to Bank

In U.S. v. Najjor the defendant argued the bank suffered no financial harm from the alleged fraud. The properties in question retained enough value to cover the mortgage loans.

The court agreed financial loss is required. But the bank doesn’t have to wait for foreclosure or a sale to prove loss. The amount of the loan – not just the value of collateral – can be used to establish loss.

So this defense was rejected because the bank clearly lost money on the fraudulent loans.

Attacking Bank Credibility

Going after the credibility of big banks can be an effective defense strategy. In U.S. v. Mozilo, the defense argued Countrywide Financial inflated appraisals to issue more loans and manipulate the housing market.

This supported the argument that Countrywide was irresponsible and blamed borrowers for its own bad business practices. It looked like the bank was hiding its role in the housing bubble and recession.

The jury didn’t buy this defense and convicted Mozilo. But in other cases, attacking the bank’s credibility has helped win acquittals or get charges reduced.

Bottom Line

Mortgage fraud charges are complicated. Having an experienced lawyer is important. They understand federal law and banking practices. This helps them analyze the case and build a strong defense.

No defense will work every time. But looking at options like honest mistake, no harm to victim, and attacking bank credibility gives people a chance. The law has protections against overzealous prosecution.

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With the right evidence and legal argument, many accused of mortgage fraud can avoid conviction. Don’t take a plea deal until exploring possible defenses with your lawyer.