It is no secret: the housing crisis has created opportunities for mortgage fraud that simply were not available a decade ago. Mortgage fraud schemes are still being heavily targeted by government officials: in California, for example, the state attorney general Kamala Harris is suing three law firms, four individual lawyers, and 14 other organizations and individuals who she claims exploited borrowers looking to stay afloat on their mortgages.
The law firms allegedly solicited homeowners by mail in 17 states, asking borrowers to opt into lawsuits against mortgage providers. Officials say that victims were misled into believing that their participation would help them prevent foreclosure, lower their interest rate or reduce their mortgage balance.
Approximately 2,500 homeowners agreed to participate in the “mass joinder” lawsuits propagated by the law firms, each of them contributing retainer fees as high as $10,000. But, the promises made to victims never materialized.
Identifying Mortgage Fraud in California
Whether you are a borrower, a lender or some other party involved in a real estate transaction, recognizing mortgage fraud is not always an easy task. However, there are a few common pitfalls that everyone should be aware of.
Loan origination fraud is the most common type of mortgage fraud according to the FBI. Loan origination fraud typically involves falsifying a borrower’s financial information in order to qualify him or her for a mortgage loan. Counterfeit documents, including inflated property appraisals, are a hallmark of loan origination fraud. If something seems off or out-of-place about a document, it should raise red flags.
Another common mortgage fraud scheme involves the use of funds for purposes other than those laid out in the lender’s closing instructions. A form of embezzlement, this type of fraud is often detectable by the failure to properly record mortgage documents.
Foreclosure rescue or debt elimination/reduction schemes are also commonplace. While there are ways to legitimately avoid foreclosure or reduce debt, such as bankruptcy, some companies make promises they cannot deliver on or take advantage of loopholes in the mortgage lending market to illegally transfer property. Steep upfront fees and pledges that sound too good to be true may accompany an illegitimate foreclosure rescue or debt reduction scheme.
Not All Lenders Aware of Fraud
Although it may be surprising, some lenders may find themselves entangled in a mortgage fraud scheme without ever knowing they were a part of one. Even the allegation of embezzlement or fraud can put your job and reputation in jeopardy.
If you are facing charges of mortgage fraud or embezzlement, you should contact an experienced Riverside criminal defense mortgage fraud attorney who can evaluate your case and discuss your options for building your defense.
