Real Estate Fraud Lawyer: What to Know and How to Defend Yourself if Charged
Definition of Real Estate Fraud
Real estate and mortgage fraud have become hot-button legal issues after the foreclosure and financial crisis of 2008. Because public officials and politicians blamed the economic collapse on shady mortgage dealings, there has been tremendous pressure to fight mortgage and real estate fraud and to aggressively prosecute those suspected of committing these offenses.
Defendants accused of mortgage or real estate fraud could find themselves facing the threat of decades in federal prison because U.S. attorneys are still looking for people to make examples of. You need to defend your rights and do everything you can to protect your freedom.
A New York City real estate fraud lawyer can help you to understand the charges you face and explore the options available to you for defending yourself.
Types of Real Estate Fraud Schemes
Real estate fraud schemes can be perpetrated by individuals, investors, banks, businesses and real estate professionals. Some of the different types of real estate fraud schemes that could lead to criminal charges can include:
- Foreclosure rescue schemes
- Real estate escrow fraud
- Real estate investment fraud
- Property flipping fraud
- Real estate broker fraud
- Title fraud
Each different fraud offense could lead to multiple criminal charges at the state or federal level, depending upon what charges a prosecutor or U.S. attorney chooses to pursue. An experienced real estate fraud attorney knows state and federal laws applicable to common types of real estate schemes and can help you to find ways to defend against the accusations being made.
Contacting an attorney as soon as you are under investigation can help you avoid self-incrimination and can ensure that police and federal investigators obey the laws and respect your rights when trying to build a case against you.
Foreclosure Rescue Scams
Desperate homebuyers are often eager for any way to save their home or avoid financial disaster when faced with foreclosure. As a result, many different types of real estate fraud involve foreclosure rescue fraud schemes. Examples include:
- Title fraud and Leasebacks: Companies or investors approach people who are in foreclosure and promise the homeowners the house can be saved if they enact a “temporary” title transfer. The homeowner may be told they can lease the house back with an option to buy later. Often, however, the rescue company sells the house, paying only a minimum amount to the owner and leaving the owner on the hook for the mortgage.
- Equity stripping: A homeowner in foreclosure gives up ownership of the house but continues living there and paying rent. The company or investor who took ownership can cash out all of the home equity and collect rent money, but ultimately the mortgage does not get paid. The original homeowner is subsequently evicted from the house and the home is either sold by the person or company who took ownership or it goes into foreclosure.
- Fees for “renegotiating” A homeowner is told that a home loan can be renegotiated for a fee. The fee is collected, but either no negotiations occur or the negotiations occur and favor the negotiator. In some situations, the person or company who collected the fee from the homeowner will end up negotiating with the lender to personally buy the home at a low price.
The original homeowner or the financial institution may face financial loss when foreclosure rescue scams occur. Penalties are generally much more severe if the bank or mortgage lender faces financial loss. The defendant can be charged with bank fraud for some foreclosure rescue schemes, even if the intent was to defraud the property owner. The U.S. Supreme Court ruled in Loughrin v. United States that bank fraud charges are appropriate if the fraud would naturally result in a financial institution losing money or items of value.
Real Estate Escrow Fraud
Escrow fraud can involve making out counterfeit checks for escrow deposits on properties. After the check is deposited but before it is cleared, a request is made to wire a portion of the escrow money back.
Escrow companies may also be guilty of escrow fraud. When homeowners apply for loans, an HUD-1 settlement statement provides instructions to the escrow officer such as instructions to pay off credit cards or existing loans. Escrow companies can modify the HUD-1 statements and not follow the instructions. Instead, the money is taken by the escrow company or individuals working for that company and the borrowers are left without the money from the escrow accounts.
Real Estate Investment Fraud
Different types of fraudulent actions can constitute real estate investment fraud. One common type of fraudulent investment property scheme usually involves getting investors to buy investment properties under false pretenses. These types of schemes may require large investments with the promise of significant increases in property values or high rates of return on capital that is contributed. These returns and increases in value do not materialize.
Properties may be flipped at inflated values to the investors, or buyers who become part of investment clubs may be misled about what properties are being purchased and whether the properties are being rented and maintained.
Both investors and financial institutions can experience losses. Buyers who take loans to invest in inflated real estate deals may end up owing more than the property is worth, or the loans may never be paid back and the properties may be put into foreclosure. In some cases, real estate investment schemes can run afoul not only of fraud laws but also of securities laws, leading to additional charges.
Property Flipping Fraud
Property flipping is generally legal, but it can cross the line into a real estate fraud scheme when a property is purchased and quickly sold at a price well above appraised value. Investors who purchase properties, perform shoddy work or hide defects, and flip the properties without disclosure to buyers may also be charged with property flipping fraud.
Real Estate Broker Fraud
One common type of real estate broker fraud involves taking money sent by home shoppers instead of putting it into escrow accounts or towards the purchase of the homes the buyers are interested in.
Real estate brokers may also provide false information to buyers to convince them to purchase homes at above market value or may help home buyer to provide false information to secure mortgage loans they should not qualify for.
Title fraud may involve misrepresenting a property as having clean title or providing materially false or misleading information about the clarity of title of a property to a buyer.
An individual could also assume the identity of a property owner and sell the property to a purchaser who is unaware that the property is actually owned by someone else. The true owner of the property could be forced to defend his interest in the property, evict the new “buyer,” and fight against having their title subject to a mortgage that the buyer has put on the home’s title.
Other Types of Real Estate Scam Schemes
Other types of real estate fraud schemes may include:
- Equity skimming: Equity skimming involves buyers convincing sellers to list a home for much more than the house is worth. The buyer typically tells the seller that the goal is to obtain a larger mortgage. The buyer may take out the big mortgage, pay the asking price to the seller, and disappear with the cash balance. This can lead to the house going into foreclosure.
- Land fraud: Companies aggressively market land, promising huge profits or substantial gifts. Unimproved, recently-purchased lots are then sold to buyers for far more than the land is worth.
- Predatory lending: Lenders convince homeowners or potential home buyer to take disadvantageous mortgage loans that have very high interest and fees.
These are just a few of many examples of different kinds of potential real estate fraud schemes. Almost any type of false or misleading statements made in connection with the purchase or sale of real property could be considered a form of real estate fraud.
If you are accused of making misleading statements or false promises, or if you have been charged with a fraud offense, contact a New York real estate fraud lawyer for help.
Penalties for Real Estate Fraud
Penalties for real estate fraud could include state and federal criminal charges. Bank fraud and wire fraud alone could lead to decades in prison and substantial fines. Making false statements on loan and credit applications could lead to 30 years incarceration of a $1 million fine under 18 U.S. Code Section 1014. Identity theft, aggravated identity theft, fraud in relation to title records, are more federal charges that could be brought against a defendant accused of real estate fraud.
Those facing charges could not just be sent to jail but could also be subject to criminal and civil forfeiture of assets. You could be required to make restitution, and the government could freeze your bank accounts and seize items belonging to you. In some cases, the accounts can be frozen and assets taken even before a criminal conviction.
You need to understand your rights, especially as federal prosecutors continue to crack down on people accused of real estate fraud.
A Real Estate Fraud Attorney Can Help
There are defenses to fraud charges related to real estate, including a lack of intent to defraud. Often, homeowners and borrowers misunderstand or make bad decisions despite being informed.
Many types of transactions can also straddle the line between legal and illegal real estate deals. You should get the benefit of the doubt because a prosecutor has to prove a case beyond a reasonable doubt to secure a conviction. A real estate lawyer who knows the law will can help to identify ways to undermine a prosecutor’s proof that a fraud offense was actually committed.