Federal real estate fraud can involve a defrauding scheme with a federally insured lending institution like a bank or other type of mortgage lender. There are many real estate fraud schemes. The federal government has increased its investigation of them. This has resulted in an increased number of prosecutions for federal real estate fraud. It includes straw buyer loans, inflated appraisals as well as air loans, equity skimming and more.
Straw Buyer Loans
A straw buyer will purchase property for an investor who does not have the financial qualifications for a loan. This is usually done when an investor has other multiple property loans. The investor does this with the intent to resell the property as soon as possible for a profit. This is often discovered when the real estate market suddenly drops. It can result in an investor defaulting on their straw buyer loan and getting caught in a scheme when they attempt to flip the property. The act of flipping property can be a legal action. Fraud charges will be filed for the deception involved with purchasing the real estate using a straw buyer.
In this situation, a straw buyer is used to buy real estate for an investor. This property is then sold and repurchased many times. Each time this is done, it sold and purchased at a higher price. This often involves corrupt title companies as well as appraisers and other real estate professionals. The proceeds from the buying and selling of these properties are kept by the investor, title companies, appraiser and others involved with the scheme.
This is when no collateral is involved with a non-existent property. A real estate broker creates properties and borrowers and establishes an account for their payments. Those involved in this will also maintain custodial accounts for escrows. This is done to obtain profits on loan transactions that have been completed and involved defrauding lenders. Some have also set up fake credit histories, home addresses, mailboxes and more.
An investor may use false credit reports, false income documents to get a loan in the name of a straw buyer. Just before the closing, a person acting as the straw buyer will use a quit claim deed to sign the property over to the investor. This ends all the straw buyer’s rights to the property. There is no guaranty title to the property. In this situation, the investor doesn’t make mortgage payments. They will rent the property out until it goes into foreclosure. This could take several months to occur.
Federal real estate fraud is a serious charge. When mortgage fraud schemes involve certain federal agencies like the Veterans Administration (VA), Federal Housing Administration (FHA) and other federal agencies, offenders are prosecuted at the federal level.
*Prison Sentence – On a federal level, a conviction of a felony charge could involve up to 30 years of incarceration. A sentence could also be incarceration of up to twelve months for a misdemeanor charge.
*Fine – This can often be a significant amount. In some situations, one federal charge could result in a fine being given for as much as $1,000,000. The amount will be determined on whether a person is charged with a felony or a misdemeanor.
*Restitution – This involves an injured party being compensated for any type of financial injury they experienced. In most cases, this will involve payments being made to a mortgage lender who was financially injured.
*Probation – This could last for a minimum of twelve months. A person will usually begin serving probation after being incarcerated. In recent years, probation has often been longer than twelve months. It comes with probation terms. This could be not committing any more criminal acts, regularly reporting to a probation officer as well as submitting to drug testing and more.
A legal professional will know that there is a fine line in the world of real estate between what is considered legal and illegal. It is possible for a flip house situation to appear illegal and the responsible parties being charged. In some cases, a person’s charges are based on a prosecutor’s view on the type of repairs performed prior to selling the home and more.
Should someone be charged with real estate fraud at the federal level, they should contact an experienced lawyer as soon as possible. A knowledgeable attorney can carefully analyze all the facts involved in the situation. An attorney will know what needs to be done if they are speaking with state or federal prosecutors. These legal professionals know how to show their client’s lack of intent to commit fraud and work toward getting an acquittal.