Under §32.32 of the Texas Penal Code, “False Statement to Obtain Property or Credit or in the Provision of Certain Services,” real estate fraud is said to occur when
- “(b) A person commits an offense if he intentionally or knowingly makes a materially false or misleading written statement to obtain property or credit, including a mortgage loan.
- (b-1) A person commits an offense if the person intentionally or knowingly makes a materially false or misleading written statement in providing an appraisal of real property for compensation.”
Real estate fraud is a felony in Texas and the severity of the penalty (if convicted) depends in part on the amount of money involved. In some cases, the federal government may prosecute real estate or mortgage fraud and federal sentencing guidelines may apply.
What Constitutes Real Estate or Mortgage Fraud?
State and federal investigators have increased efforts to catch real estate investors, mortgage brokers, and individual homeowners who may have falsified certain kinds of information on mortgage applications or home appraisals. In general, investigators carefully review home loan applications and real estate sales for evidence of the following:
- Falsified loan application information
- Inflated or deflated appraisal of property
- Unusual underwriting practices that deviate from the norm
- Inflated reporting of income or assets
- Failure to accurately indicate a primary or secondary residence
In other cases, investigators are interested in so-called “straw buyers” – people who take out a home loan as a front man for a real estate investor who then upgrades and “flips” the home in order to realize a profit. Profits are then split with the straw buyer who has used his or her information to qualify for the original home loan.
Investigators are particularly interested in straw buyers because they are used to circumvent certain financial requirements the original investor may not be able to meet. As a result, there is a higher likelihood of falsified mortgage documents and mortgage fraud in cases involving house flipping and straw buyers.
Mortgage Fraud and Money Laundering
In certain situations involving homeowners and real estate investors, an attempt to avoid taxes can result in money laundering charges in addition to mortgage fraud. Typically, when a real estate investor sells a house at a profit, he or she may attempt to collect the money by asking the homebuyer to disperse one or more checks in amounts less than $10,000 to avoid detection by the government. Several cashier checks may be bought by friends or family and in turn passed along to the real estate investor. At this point, however, under federal law those involved have just committed an act of money laundering. As a result, a homeowner, buyer, real estate investor, or those that participate in similar schemes may find themselves facing a charge of money laundering in addition to mortgage fraud charges.
Contact Dallas Real Estate Fraud Attorneys at Clancy & Clancy
Whether you’ve been charged with real estate fraud or are under investigation, it’s important to talk to an experience mortgage fraud lawyer who understands how to protect your rights and help you avoid incriminating statements and behavior. To learn how we can help you, call (214) 740-9955 or email Dallas—Fort Worth real estate fraud attorneys at Clancy & Clancy today.