Misrepresenting information or lying on a home loan document is generally considered to be mortgage fraud. In many cases, one party supplies fake information to obtain a mortgage while another party uses that information as a basis to make the loan. For instance, an applicant may inflate his or her salary on a W-2 or a real estate professional may claim that a home's appraised value is much higher than it actually is.
There are two general types of mortgage fraud as defined by law enforcement. The first is called fraud for housing and occurs when the borrower lies on an application to gain loan approval or better loan terms. Fraud for profit occurs when a broker or appraiser does something fraudulent to earn money on a transaction. Investigations usually target professionals, but buyers have been charged in the past as well.
The Fraud Enforcement and Recovery Act was passed in 2009 in an effort to find those who may be trying to engage in mortgage fraud. Those convicted under the statute could face up to 30 years in prison as well as a fine of up to $1 million. Some states have their own mortgage fraud laws that may levy additional penalties. Through the course of an investigation, an individual may also be charged with tax or bankruptcy fraud.
Anyone who is charged with mortgage fraud may face serious penalties. Therefore, it may be a good idea to talk to an attorney as soon as possible. An attorney may be able to create a defense to the charge such as arguing that the individual believed that the information provided on a mortgage document was accurate. If successful, it may result in the charge being dropped.