I. “Foreclosure Scams”
The term “foreclosure scam” refers to a plan of action that prevents, or attempts to prevent, foreclosure of residences or other real estate, but involves making false statements to potential lenders during the process. Basically, a foreclosure scam, according to federal agents and federal prosecutors, will involve making false statements to lenders in order to secure lending to pay the original mortgage, which is in default and in danger of foreclosure. The alleged false statements are usually in the form of the identity of the new buyer, and/or the amount of monies available for payments of outstanding expenses on the property and the closing costs.
II. Preventing Foreclosures
Sometimes a legitimate buyer or real estate agent may be targeted for investigation based on their genuine efforts to stop someone’s foreclosure, if the efforts include making false representations to a lender or potential lender. This is where a new buyer and/or real estate agent may make estimates, offers, or provide proof of funds available that may be, or may be construed to be, false statements.
These activities occur when an agent or new buyer are seeking a sale / purchase of the property to start a new buyer making payments to the lender before the property is foreclosed. If a new buyer purchases the property and begins regular payments, that, of course, avoids the lender foreclosing on the property.
III. False Statements to Complete the New Lending
Statements needed to complete lending to replace foreclosure actions sometimes will be false statements. This is usually in the form of statements or letters from a supposed new buyer, who claims to be the buyer of the property when they may have only been recruited to sign such a letter.
Other common false statements or representations are in verifications of funds given to the lender. Blatant false statements are those that list an amount of money in a certain bank account showing the supposed monies available to pay the down payment, costs of the loan, closing costs, etc.
The “gray area” with verification of funds is where the buyer or real estate agent, who provides the verification, obtains the verification of funds as a short-term funding amount as opposed to an actual cash balance. Lenders, or later, investigators and prosecutors, will take the verification statement as a literal amount of monies available in an account, as opposed to a short-term loan amount to draw upon if needed, even if that was the buyer’s understanding.
IV. Common Allegations in Federal Prosecutions
Several common criminal charges in federal prosecutions of foreclosure scams are listed here. These are basically the same potential charges for many white-collar offense investigations and cases. Potential charges include:
- False Statement to a Financial Institution;
- Bank Fraud;
- Conspiracy to Commit Fraud;
- Wire Fraud;
- Mail Fraud; and
- Bankruptcy Fraud, if the property is in bankruptcy.
V. Sentencing Guidelines Factors
In federal cases, the U.S. Sentencing Guidelines give a recommendation to the judge as to a range of imprisonment for a person who is convicted. There are a number of factors that will result in the recommendation range. Some factors are common for the criminal charge, and some relate to the particular facts of the case. Both can affect the U.S. Sentencing Guidelines calculations, which will give an imprisonment recommendation range. These factors include:
- The dollar amounts for which the defendant is responsible;
- More than minimal planning to begin and carry out the fraud;
- Whether there was a group of persons involved in the fraud scheme and if the defendant was a leader of the group;
- Misrepresentations that the company was affiliated with a government agency; and
- If the defendant cooperates with the government and produces results from the cooperation.
VI. If You Are Under Investigation
If you or your company are under criminal investigation, you need experienced federal counsel. Contact former federal prosecutor John Teakell, who will help you obtain your defense evidence and defend against any charges brought against you.