With the rise of the real estate market, cases of real estate fraud have grown in recent years.
The payoff in these scams can be high, but the penalties for the crimes are equally steep. Here, we break down what constitutes fraud and what the penalties are.
What is Real Estate Fraud?
Real estate fraud can take a variety of forms, all of which take advantage of a victim in a bad situation.
If you are involved in the real estate business and see any red flags, don’t hesitate to take legal action. If you find yourself in a position to commit fraud, stop. The penalties for fraud in Florida are high, and a conviction will follow you for the rest of your life.
Types of Scams
This type of fraud can take a variety of forms connected to various stages of the real estate process, including:
- Home improvement fraud
- Equity skimming
- Illegal flipping
- Fraudulent loan origination
- Land fraud
- Rental fraud
If it seems sketchy, that’s because it probably is.
For example, let’s talk foreclosure rescue, one of many varieties of fraud in this category. The scam is essentially what it says on the label: companies prey on families facing foreclosure who are desperate to keep their homes.
In this scam, companies convince families that they can save their homes by signing a temporary title transfer to the company, usually for a fraction of what the house would have been worth on the market. The family can stay in the home and pay rent for the duration of the title transfer in a “leaseback”.
In actuality, the company sells the house once they have the title from the owner, and the owner is stuck paying what they originally owed on their mortgage.
What is Mortgage Fraud?
Mortgage fraud is one variety of real estate fraud focused exclusively on mortgages–an area where many people are in debt and vulnerable.
There are two main types of mortgage fraud:
- Fraud for profit
- Fraud for housing
The essential difference is who’s being conned: the potential homeowner, or the lending institution.
Fraud for profit is typically committed by industry insiders who figure out how to use the mortgage system to steal money, though the goal isn’t homeownership. Fraud for housing, as the name implies, is committed by a would-be homeowner with the purpose of acquiring or maintaining homeownership.
Within these two types of mortgage fraud, there is a wide range of potential scams. These include:
- Mortgage elimination programs
- Silent second mortgages
- Falsification of employment income
- Kickbacks
- Inflated purchase price
- An occupancy claim by a non-occupant
For example, mortgage elimination programs are a classic fraud for profit scam. These programs convince homeowners that they can get out of their mortgages in a quick period of time (falsely, of course), and charge them a premium for their services, leaving the homeowners financially worse off than before.
Inflated purchase price, on the other hand, is a fraud for housing scam. Let’s say you have two purchase contracts. One of them is false, but it has a higher sales price. If you send the fake to the lender to get a better appraisal value, congratulations–you just committed mortgage fraud.
Penalties for Real Estate and Mortgage Fraud
Put it this way: if you’re charged with real estate or mortgage fraud, you’re staring down the barrel of steep penalties.
First, let’s break down how Florida law defines fraud. Then we’ll talk about the penalties involved in cases like this.
Laws Governing Fraud in Florida
Within Florida state law, real estate and mortgage fraud are governed by Statute 817.545.
Under this law, a person has committed mortgage fraud if they act knowingly and intend to defraud while:
- Materially misrepresenting facts in order to obtain a loan
- Knowingly facilitate the misrepresentation of facts
- Receive material proceeds from the misrepresentation of facts
- Filing a document involved in the mortgage process misrepresenting facts
Essentially, if you are seen as knowingly and willingly misrepresenting information in the mortgage and real estate process, or receive material benefit from that misrepresentation, you have committed fraud and can be charged.
Documents for Consideration
Before we proceed, it’s important to note what documents in the mortgage process can be considered as part of material misrepresentation of facts. These include, but are not limited to:
- Deeds
- Mortgage documents
- Appraisals
- Inspection reports
- Residential loan applications
- HUD-1 settlement statements
It can also include personal documentation that is part of loan applications, including:
- Tax returns
- Payroll stubs
- W2 forms
- Bank statements
- Verification of income
- Verification of employment
- Relevant disclosures
If you misrepresent information on any of these documents for material gain, mortgage loans, or improper acquisition of real estate, then you have committed fraud.
Common Penalties
If you have committed real estate fraud, you are subject to various penalties in the state of Florida. You’re in even bigger trouble if you’re charged at the federal level as well.
And chances are, you’re facing penalties under several laws, as the crime often involves several state and federal laws.
In almost all cases, this kind of fraud is classed as a felony, even if the amount is below $1,000. If the amount is below $100,000, it is considered a third-degree felony. Anything above $100,000 is a second-degree felony.
Penalties are meted according to the offense. These include:
- Fines
- Prison time
- Restitution
- Probation
Fines are steep in these cases, especially in the case of fraud for profit. It can go as high as a $1 million fine if your case is prosecuted at the federal level.
Prison sentences are also a common penalty in real estate fraud and the length of the sentence can be even longer if you’re federally prosecuted. Think something in the family of 30 years behind bars.
On top of that, you also have to pay restitution to third parties who suffered financial damages as a result of the fraud.
If You’ve Been Charged with Real Estate Fraud
If you’ve been charged with real estate or mortgage fraud, or if you’ve been a victim, don’t wait to get in touch with an attorney.
Real estate and mortgage fraud are one of our specialty areas, so when you open a case with us, you can rest assured you’re in good hands.
If you’ve been arrested, read this for information on what to do next. If you don’t have time to wait, get in touch with us through our contact page today.