White-collar crimes in New York cover a range of illegal financial acts that are not commonly violent but are still deceitful. The term gets its name from the typical offender, which includes people in affluent business sectors. A type of white-collar crime includes bank and mortgage fraud schemes.
Overview of mortgage fraud
Statistics estimate that 1 out of 109 loan applications may be fraudulent; mortgage lenders experienced around 1,300 fraudulent attempts monthly in 2020. According to the FBI, bank and mortgage fraud involves willful omissions, misrepresentation, misstatements to profit or benefit from loans. Bank and mortgage fraud is commonly for profit, which is committed by the employees, or for housing, which is committed by clients.
A borrower may commit mortgage fraud to secure loans they wouldn’t qualify for or to keep property. An employee or a group of employees may commit mortgage fraud to increase bonuses on approved loans. Other industry professionals in the chain can be involved, such as real estate brokers, appraisers and insurance agents.
Common mortgage fraud scams
A common scheme uses a straw buyer who makes the purchase using their good credit. Instead of living in the home, the straw buyer passes the property to the buyer with a quitclaim and relinquishes rights. However, a straw buyer isn’t always illegal if it doesn’t involve fraud or the buyer hasn’t been prohibited from buying.
A common type of loan fraud committed by employees is an air loan, which involves creating a fake buyer and property to make profits. The scammer may create false addresses, jobs or phone numbers to verify employment.
Appraisal fraud occurs when an appraiser inflates the value of the home above fair market value. This is commonly done to help the buyer get financing, and the seller earns a higher profit.
The FBI attempts to curb mortgage fraud because of the impact on the economy. Federal mortgage fraud penalties include a 30-year jail term and up to four years under New York state law, so it’s wise for those accused of this crime to develop a strong defense.