Since 2008, bank and mortgage fraud has become a much hotter topic of enforcement both at the state and federal level. At the basic level, it simply refers to any “purposeful misrepresentation or deception in the banking or mortgage field,” which could be predatory lending practices, but not necessarily.
Housing
One of the most commonly talked about forms is housing or mortgage fraud. This is often committed by home flippers or investors who may not even realize they are committing a crime when they do it. According to the FBI, these groups commit it when they make a material false statement, misrepresent or omit information relating to the property or potential mortgage based on an underwriter or lender who funds, insures or purchases a loan. This can take the form of fraud for profit or fraud for housing.
Fraud for profit
Fraud for profit is generally committed by industry insiders who use their inside knowledge or their authority to commit fraud. This could be using their knowledge to steal equity from lenders or homeowners, lie on paperwork to get loans for applicants who do not qualify or other similar frauds.
Fraud for housing
On the other hand, fraud for housing is done by borrowers who want housing. These borrowers misrepresent their income or assets to manipulate some part of their application to attain a loan or housing fraudulently. Somewhere in the middle could be a home flipper who takes out an FHA loan and who commits to own the home as their primary residence, but then flips the home to another buyer before they are allowed.
Overzealous prosecution
Prior to 2008, prosecutors rarely prosecuted many of these crimes. However, after 2008, there has been, arguably, an over-correction, even here in the New York City metro area. If you find yourself caught up in this, you have options.