Federal Mortgage Fraud
A conviction for Mortgage Fraud will carry a lengthy prison sentence.
Mortgage Fraud traditionally involves an effort to defraud homeowners who are in financial trouble or defraud a lender to obtain a loan.
Definition of Federal Mortgage Fraud
Under 18 U.S.C. § 157, the federal crime of Mortgage Fraud is committed when a person engages in a scheme to defraud during the mortgage application process.
A “Mortgage” is broadly defined as any form of investment, such as stocks, bonds, bank notes, commodities, investment contracts, and options.
Conspiracy to Commit Mortgage Fraud
Conspiracy to Commit Mortgage Fraud occurs when two or more people work together to engage in the manipulation of financial markets or fraudulently induce investors to makes financial decisions.
Importantly, Conspiracy to Commit Mortgage Fraud can, and usually is, charged against minor participants in mortgage fraud scheme.
The government charges minor participants with Conspiracy to Commit Mortgage Fraud because under 18 U.S.C. § 371, the penalties for Conspiracy to Commit Mortgage Fraud are the same as actual Mortgage Fraud, which results in minor participants cutting deals to testify against major participants in order to avoid the severe penalties Mortgage Fraud carries.
Penalties for Mortgage Fraud
Under federal law, the crime of Mortgage Fraud is a Class C felony, punishable by up to twenty years in prison, three years of supervised release, and $5 million in fines. Additionally, disgorgement of any profits will be ordered and any property obtained from the proceeds of the offense can be confiscated.
Under the United States Sentencing Commission, Guidelines Manual, §2B1, a person convicted of Mortgage Fraud would be assigned a base offense level between 8-36, which carries a guideline range of probation up to 33 months in prison before taking into account any mitigating or aggravating circumstances.
Importantly, probation is rarely given in federal cases and the amount of financial loss or the existence of aggravating offense characteristics associated with a particular Mortgage Fraud case can result in a significantly greater prison sentence than 33 months in prison.
As of 2018, the average federal sentence imposed for Mortgage Fraud fell between 20-24 months in prison. [1]
Defenses to Mortgage Fraud
In addition to the pretrial defenses and trial defenses that can be raised in any criminal case, common defenses to the federal crime of Mortgage Fraud include:
Good Faith Belief
It is a defense to the federal crime of Mortgage Fraud if a defendant honestly and in good faith believed the deceptive statements or promises made as part of the scheme were true. [2]
However, a defendant cannot engage in willful blindness by ignoring the truth of the statements. Nor is it a defense if the defendant intends to deceive but feels the victim will ultimately profit or be unharmed.
No Knowledge
Commonly called the No Knowledge Defense, section 32(a) of the Mortgage Exchange Act of 1934 provides that “no person shall be subject to imprisonment for the violation of any mortgage rule or regulation if the person proves to have no knowledge of such mortgage rule or regulation.”
The No Knowledge Defense is a unique, post conviction, affirmative defense, whereby the defendant must prove by a preponderance of the evidence the defendant was unaware of the existence of the SEC rule or regulation that prohibited the illegal conduct constituting the charged Mortgage Fraud. [3]
If the No Knowledge Defense is successfully asserted, a court would be required to sentence a defendant to straight probation.
Substantial Assistance
While not technically a defense, Substantial Assistance is the most commonly utilized method to avoid the severe penalties the crime of Mortgage Fraud carries.
The prosecutor is authorized by statute to ask the court to reduce or suspend a sentence of any person who is convicted of Mortgage fraud when the person provides substantial assistance in the identification, arrest, or conviction of any other person engaged in the scheme to defraud.
Unlawful Search and Seizure
Often, law enforcement exceed the scope of their authority and require people to submit to a vehicle, home, or property searched when they otherwise would not be required to, coerce people into agreeing to a search, arrest people without probable cause, or obtain search warrants in bad faith.
If any of these can be proven through the filing of a Motion to Suppress, the courts will suppress the resulting evidence as having been unlawfully obtained in violation of the Fourth Amendment of the United States; which can lead to an outright dismissal of the case or reduced charges.
Contact Federal Defense Lawyer Richard Hornsby
If the Federal government is prosecuting you for the crime of Mortgage Fraud in federal court, contact Orlando Federal Criminal Defense Lawyer Richard Hornsby today.
The initial consultation is free and I am always available to advise you on the proper course of action that can be taken.