The penalties you can expect from committing mortgage fraud

Mortgage fraud continues to become more and more prevalent. In the 2018 fiscal year, the sentencing commission–which analyzes sentencing data–received almost 70,000 cases. Close to 3% of that those cases involved mortgage fraud. Although this may not sound like much, the loss due to this crime averaged $1,314,617.

In the second quarter of 2019, close to 85% of all mortgage applications contained fraud, down from 2018’s 92%. Although Texas did not rank as one of the nation’s top states with the most cases of mortgage fraud, it did place in the eighth position with the most identity theft and fraud combined.

Mortgage fraud

Individuals who omit or misstate information in the lending process commit mortgage fraud. Borrowers, lenders, investors and others who do this intentionally carry out a white-collar crime. And although a realtor may ask a person to stretch the truth a little on the application, the prospective homeowner’s future is in danger of possible indictment and a prison sentence.

The penalties

Federal and state penalties are much the same for mortgage fraud. Under federal law, it is a Class C felony punishable by up to 20 years in prison and several millions of dollars in fines. Most federal convictions include restitution payments, as well. Restitution helps to compensate the victim of any wrongdoing.

Texas mortgage fraud convictions also may carry stiff consequences. Penalties may include:

  • Class C misdemeanor – Up to $500 fine
  • Class B misdemeanor – Up to 180 days in jail or up to $2,000 fine
  • Class A misdemeanor – Up to one year in jail and up to $4,000 fine
  • Third-degree felony – two to 10 years or $10,000
  • Second-degree felony – two to 20 years or $10,000
  • First-degree felony – five to 99 years or $10,000

Mortgage fraud only occurs when a person or entity knowingly makes misrepresentations or omissions. A person who mistakenly reports information concerning their income may have done it accidentally. In other words, there must be an intent to defraud for mortgage fraud to occur.