Understanding the Criminal Charges for Buy and Bail Fraud
What is Buy and Bail?
Buy and bail involves acquiring a new home before walking away from a home you already own that is underwater. The purchase of the new home occurs before walking away from the old home to make it possible to qualify for a new mortgage before the foreclosure goes on your record.
Buy and bail can leave the bank with a financial loss when foreclosing on the home you walked away from. While some may consider this unethical, it is not illegal in all circumstances. Buy and bail only crosses the line into breaking the law when you lie on the new loan application.
If you lie to get a loan, you could face serious consequences including state penalties for mortgage fraud and federal penalties for bank fraud.
You have options to try to defend yourself against the charges against you, and a New York City real estate fraud defense lawyer will work hard to help you do everything you can to avoid being convicted of a crime if you are accused of buy and bail.
Crossing the Line
When homeowners are underwater on a loan and owe more than the home is worth, it can be frustrating to continue making payments month after month. In many cases, homes were so overvalued in the real estate bubble leading up to the 2008 financial collapse that it could be decades before a house recovers and is worth what you owe or have paid for it. Homeowners understandably want to get out from under the loans for these homes, and many don’t have a problem walking away from the bank since irresponsible lenders unquestionably played a big part in encouraging the mortgage crisis that led to the property collapse.
The problem is, walking away from a home can make it difficult to qualify for another loan for at least two years after a foreclosure (after this time, you can usually qualify for an FHA loan if you’ve rebuilt you credit). Homeowners who don’t want to wait may purchase a new home, apply for a new mortgage, and move into their new home before strategically defaulting on their old one. Homeowners buy the new house, and bail on the old.
Buy and bail becomes fraudulent if you lie on the loan application to qualify for the new loan. Mortgage companies and mortgage guaranteers including Fannie Mae and Freddie Mac have tried to stop the practice of buy and bail by imposing stricter requirements on new residential home loans, which sometimes includes requiring proof of sufficient funds to pay mortgages on both the old and new properties for a period of time (usually at least six months). However, it is still possible to qualify for a mortgage on a new home with intent to default on an old one, especially if material misstatements or false or misleading statements are made on the new loan application.
Buy and Bail Consequences
Buy and bail consequences can be severe when lying on mortgage loan documents. New York prohibits residential mortgage fraud and defines different degrees of the offense in Penal Code Article 187. The amount of the funds that are received through the fraudulent loan determine what offense you can be charged with. Residential mortgage fraud in which funds or proceeds are received that exceed $1 million in aggregate is first degree mortgage fraud and a Class B felony. Mortgage fraud in the fifth degree, on the other hand, is a Class A misdemeanor that you can be charged with if you receive funds improperly that total $1,000 or less.
Because lying on a mortgage application can be considered an attempt to improperly obtain funds from a financial institution through the use of a scheme or artifice, you can also be charged with the federal offense of bank fraud (U.S. Code Section 1344). Federal charges are much more serious than state charges: you could go to jail for 30 years and be fined up to $1,000,000.
Getting Help from a Real Estate Fraud Lawyer
If you are accused of buy and bail or any real estate fraud scheme, you need an attorney who will work hard to help you avoid being convicted of a crime. A New York City real estate fraud lawyer at Bukh Law Firm can help you try to fight to avoid buy and bail consequences by securing a not guilty verdict or by negotiating a favorable plea agreement.