Common questions and issues to consider as defense to the charge of mortgage fraud:
1. What if you obtained a loan as a stated income loan, did you commit fraud?
Probably not if you didn’t lie. Stated income loans were designed for those with erratic income or rising income. The best litmus-test would be to pull the 3-6 bank statements prior to application. If the monthly deposits mirrored your “stated” monthly income, you didn’t lie. If you grossly overstated that amount, you lied and probably committed fraud. Cash flow rules.
2. What if you bought a second home with the intention to use it as a vacation rental property. You financed it as a second home, did you commit fraud?
Probably not if you resided in it for at least 15 days each year. It’s a “vacation” home and if you used it for vacations, you’re fine. You are still allowed to rent out a vacation home.
3. What if you bought a property, in your daughter’s name, as an owner-occupied home but she rents rooms out to students. Did you commit fraud?
FHA has the “kiddie-condo” program. Actually, that means that you can be a non-occupying co-borrower and still get a owner-occupied rate. If your daughter qualified on her own, and you helped her with the down payment by signing a gift letter, you might be liable for taxation but the transaction appears to be legit.
4. You have funky employment. It’s not steady so you coerced your existing employer to “fudge’ the dates on a Verification of Employment form. Did you commit fraud?
The prosecutor will say “Go directly to jail, do not collect $200. Say hello to your boss while you’re there.” But, there are always a variety of defense to all charges, and you can’t throw in the towel just yet.
5. You added your name to your father’s Merrill Lynch account a few months before the loan application to “boost up” your assets for the application. Was that fraud?
Probably Kosher. Your father was VERY trusting as you could have cleaned out the account but it was kosher. Parents can add children to their accounts for a number of reasons. Legally, you owned those assets for more than 60 days before application so the money was (and may still be) yours. I’d like to meet your father.
6. You’re about to lose your home and want to offer a “work-out” with the lender. The lender is asking for my financial statements, which don’t match up with the income you stated, two years ago. What should you do?
You have two options: lose the house or buck up and tell the truth. Why did you “lie”? Well, you lied to get the loan, right? Let’s be reasonable, though. Originators purposefully stated income due to laziness and lax underwriting guidelines. They often “coached” borrowers. Mortgage money was so plentiful, income verification was sounding as outdated as “vinyl records”. If you want to keep your home by working out the loan, give the lender the income docs; just remind them that you offered them in 2005…BEFORE they approved the loan.
Mortgage fraud is often based upon intent and subsequent actions. The FBI is most interested in fraud committed by “industry insiders”, at this time. Lenders are scrambling to cauterize wounds and want straightforward talk from you, right now. Forget what happened if you’re trying to save your home. Be honest, be forthright, and don’t get bullied by some call-center employee, reading from a script.
What is mortgage fraud?
Click here to know what is mortgage fraud.
Click here to view FBI Flyer Special Alert on Mortgage Fraud
Click here to view FBI “fact sheet” on what to look for with mortgage fraud
Recent mortgage fraud cases, including Sacramento, are discussed here
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