Updated: Apr 22, 2022
Mortgage and Real Estate Fraud Charges In California
When an individual or party commits fraud in connection with the purchase, selling, rental, or financing of real estate property, it is known as real estate fraud. Real estate fraud is a felony that can result in jail or prison terms under state and federal laws. This type of fraud can occur at any time during a real estate transaction. Appraisals, closings, and mortgage proceedings are only a few examples. A Criminal Defense Lawyer can help defend you against these charges.
To punish perpetrators of this crime, states have adopted a variety of legislation and legal theories. There are some of them:
stealing under false pretenses
Statutes governing foreclosure fraud
laws against rent skimming
laws pertaining to the filing of forged deeds or records
It's worth noting that the following are some of the most popular types of real estate and mortgage fraud:
Foreclosure deception
Schemes involving straw buyers
Land flipping
extortionate lending
Prosecutors in California often prosecute real estate/mortgage fraud charges under the following categories:
Grand theft is prohibited under Penal Code 487 PC.
2945.4 of the California Civil Code forbids foreclosure fraud.
Rent skimming is illegal under Civil Code 890.
Penal Code 115 PC makes it illegal to file forged papers.
Misdemeanors and felonies are both possible charges under these statutes.
What is the difference between real estate and mortgage fraud?
When one person or company takes advantage of another in a real estate transaction, this is known as real estate or mortgage fraud. It can happen at any point during a transaction, including the:
evaluation
closing
foreclosure
To prosecute perpetrators of these offenses, states use a variety of legislation and legal theories. There are some of them:
stealing under false pretenses
Foreclosure fraud
skimming for rent
forged papers or deeds
Theft in the guise of a legitimate business
This is a crime in which someone:
defrauds someone else of money or property
False promises or interpretations are used to do this
Although state laws vary, in order to convict anyone of this crime, a prosecutor must show the following:
an accused deceived a real estate owner or mortgage lender on purpose
This was accomplished by making a false promise.
On the basis of this promise, the "victim" gave the defendant his or her property or assets.
Foreclosure fraud
California mortgage fraud is one of the most common forms of real estate fraud prosecuted in the state. In simple terms, mortgage fraud occurs when a self-proclaimed foreclosure "consultant" claims to be able to delay or avoid a pending foreclosure. More broadly, you commit this form of fraud if you engage in a fraudulent activity involving a foreclosed home or a home that is in the process of foreclosure.
This form of fraud can be seen in a variety of ways, including:
Schemes for transferring title
a bait and turn strategy
Scams involving phantom assistance
Shift of ownership
When the following conditions are met, the title is transferred:
A homeowner is in danger of losing their house to foreclosure.
He is persuaded to sign over the title to the house by a "consultant."
In these cases, the homeowner is advised by the consultant to:
He or she will rent the house and stay in it.
He will be able to buy it again in the future.
However, the consultant ultimately evicts the renter and buys out any remaining equity in the house.
Forging deeds
The act of intentionally modifying, making, or using a written document with the intent to defraud is known as a forgery. As a result, California's anti-forgery laws prohibit:
attempting to register, record, or file a forged deed
submitting a forgery deed
When is it illegal to file a false document in California?
A district attorney must prove the following elements of the offense beyond a reasonable doubt to successfully prosecute a defendant under this statute:
The accused handed over a document to be filed, recorded, or registered with a government agency.
When the accused submitted the document, he or she was aware that it was a fake or forged document.
The paper was one that could be legally filed if it was genuine.
This criminal law covers a broad range of documents, including fishing records and pay stubs. Despite this, courts have determined that the law is not too vague.
Furthermore, many criminal offenses under these laws include the filing of real estate records (e.g., quitclaim deeds, property deeds, and deeds of trusts). Charges may be brought under the following categories in these situations, depending on the type of document involved.
Penal Code 115 PC legal defenses
To counter charges of filing false documents, Criminal Law Attorney may use a variety of legal tactics. This includes demonstrating:
The defendant was unaware that a document was fabricated or falsified.
The accused failed to file a document with a government agency.
The defendant had been wrongfully convicted.
How to Argue a Defense
There is no knowledge.
Remember that under this act, a defendant is only guilty whether he or she:
sent you a document to save.
knew the paper was a forgery or a fake
This implies that proving that an accused lacked the necessary expertise is still a shield.
There is no public office.
These laws only apply if a party filed a document with a California government agency (for example, the county recorder's office or the California Department of Motor Vehicles). As a result, a defendant will attempt to refute a PC 115 charge by demonstrating that he did not provide a document to a government agency. Such an individual might have, for example, delivered a document to a private employer or corporation.
However, even if the investigation is successful and a document is found to be fraudulent or fabricated, the accused can face charges under a separate law. You can ask your Criminal Defense Lawyer for more details on the matter.
Accused falsely
People are often wrongly accused of this crime. The following are some of the reasons why "victims" make false allegations of this crime:
drama in the home
retaliation
Conflicts over land
As a result, an accused can still argue that he or she was unfairly blamed.
What are the consequences?
A breach of this provision of the code is considered a felony. The following penalties apply to the offense:
imprisonment for up to three years in a jail or prison
a fine
If a judge may grant probation instead of prison time, it is ineligible if either or more of the following conditions are met:
The accused has already been convicted of breaching PC 115.
He/she is found guilty of several counts of PC 115 and is found to have caused a gross loss of more than $100,000.
It's also worth noting that these court cases can be subject to a few sentencing enhancements.
If all of the following are real, a criminal will face California's so-called "aggravated white-collar crime enhancement":
In the same criminal case, he/she is accused of two or more felonies involving fraud or embezzlement (one of which may be PC 115 filing fake or forged documents).
The felony offenses are part of a larger trend of criminal conduct.
The felonies are committed against two or more different victims or against the same victim on several occasions.
The defendant is accused of depriving the victim or victims of more than $100,000 as a result of his conduct.
This enhancement for aggravated white-collar crime will lead to:
one to five extra years in federal prison
an extra fine, or twice the fraud number (whichever is greater)
A breach of this law may have a negative impact on immigration.
Certain offenses are classified as "crimes involving moral turpitude" under California law, and if a non-citizen defendant performs one of these offenses, he or she can be deported.
Inadmissible is a term used to describe something that isn't allowed to be said.
If the defendant behaved with the intent to defraud, a PC 115 breach, according to one California judge, is a felony involving moral turpitude. As a result, if an accused acted with this motive, he could face expulsion or inadmissibility. Ask your Criminal Defense Lawyer for details on immigration penalties.
Is it possible for a party to get a conviction overturned?
An expungement is not possible for someone who has been accused of filing a false document. This state's statute states that if the crime is punishable by a jail sentence, the conviction cannot be expunged.
What impact does a conviction have on gun rights?
A prosecution for falsifying documents would have a negative impact on a person's gun rights. According to California law, convicted felons must give up their right to buy a gun.
To own a gun and to be in possession of a gun.
Since filing a false document is a crime, a conviction will result in the loss of a defendant's gun rights.
Predatory Lending
In recent years, the concept of predatory lending has received a lot of national attention. Most people associate it with major financial institutions such as banks and subprime lenders preying on the vulnerabilities of first-time homebuyers and homeowners in troubled areas.
Small lenders, real estate agents, mortgage brokers, appraisers, and other individuals have been targeted by federal, state, and local authorities in California for crimes related to predatory lending.
When is Predatory Lending in California a Crime?
According to the Federal Deposit Insurance Corporation (FDIC), illegal "predatory lending" usually entails borrowers being forced to accept unfair and coercive loan terms (often through deceptive sales tactics), taking advantage of the borrower's lack of understanding of complex transactions, and
blatant deception
Simply put, predatory lending is illegal in California when a lender manipulates a loan deal to maximize its profit without concern for the borrower's ability to repay the loan.
In general, most fraudulent predatory lending schemes have two characteristics in common. These include unjustifiable and unfair loan terms that increase the lender's potential earning power at the detriment of the borrower and target marketing to households based on illegal, discriminatory practices such as race, ethnicity, age, and/or gender that are unrelated to creditworthiness.
Let's take a closer look at these characteristics and learn more about their positions in predatory lending schemes.
Commonly Used Predatory Lending Schemes
The truth is that there are many ways to break California's predatory lending fraud rules. However, as in most crimes, some schemes are more prevalent than others.
The parts that follow provide an overview of some of the more popular predatory lending schemes.
Target ads based on racial policies that are unlawful
Predatory lenders have access to a number of public records in order to locate potential buyers. They usually prey on the uneducated and uneducated, who are unable to scrutinize the paperwork and terms of the loan. Households with low incomes but considerable equity, such as elderly homeowners, are particularly vulnerable.
To reach out to prospective customers, many of these lenders would use a phone and door-to-door solicitation, direct mailings, and television advertisements. There is nothing wrong with these activities in and of themselves. There are effective marketing techniques that are used in a broad range of industries.
When violent lenders indulge in dishonest activity by directing these tactics to poor homeowners in order to make money rather than meet the needs of their clients, these actions become illegal.
A few of the strategies used to transform an otherwise legitimate deal into an illegal California predatory lending scheme include failing to clarify the terms of the loan, such as omitting reference to a balloon payment or discouraging the borrower from seeking a lower-cost alternative.
Unfavorable loan terms
Excessively high-interest rates and/or penalties are common characteristics of predatory loans. In most cases, the lender often adds needless provisions to these loans that do not favor the borrower. Among them are (but not limited to):
irrational balloon fees (balloon payments are final loan payments that are significantly higher than the preceding payments)
Prepayment penalties are serious.
deceptive assurances of low-interest rates that turn out to be higher than expected
approvals of loans that disregard the borrower's ability to repay the loan
The lender benefits from these types of high-cost loans by collecting large upfront payments and almost guaranteeing that the borrower would default, allowing the lender to repossess or foreclose on the house. Unfortunately, a pending foreclosure puts the homeowner in a situation where he or she is more vulnerable to schemes that break California foreclosure fraud laws.
Scams involving home renovation
Predatory lending is not only practiced by mortgage brokers. This criminal activity is also aided by home improvement contractors. Unscrupulous home contractors often target inner-city neighborhoods where houses are older, sometimes in need of renovation, and where owners have built up significant equity in their properties, as well as homes owned by the elderly, which are often in need of repair and whose owners are often less likely to attempt repairs themselves than younger homeowners, which can lead to violations o (Penal Code 368).
The contractor persuades the homeowners to refinance their mortgage in order to fund home improvements that will increase the property's value. The contractor refers the owner to a predatory lender and receives a referral fee, even though the job is never completed.
Legal Defenses
Fortunately, a California Criminal Defense Lawyer may deliver a number of legal defenses on your behalf. Of course, which one is most fitting will be determined by the facts of your situation.
However, if you can show that you were not acting fraudulently and were actually engaging in a legitimate business activity like subprime lending, that is always a good defense to present.
For borrowers with poor or blemished credit records, subprime lending is available. Since they must compensate for their increased credit risk, these loans have a higher interest rate than conventional "prime" loans. These kinds of circumstances can lead to a mix-up between predatory and legal lending.
Sentencing, Penalties, and Punishment
The penalty you face for predatory lending in California will also be determined by the specific facts in your case. Predatory lending can be charged both on a state and federal level.
Federal legislation
A variety of federal consumer protection laws are in place to safeguard homeowners from predatory lending practices. The Federal Deposit Insurance Corporation's website has detailed descriptions of these rules. That include (but are not limited to) the following:
The Truth in Lending Act (TILA) is a federal law that allows lenders to (which requires lenders to disclose credit and leasing terms in such a way that the borrower will be able to understand and compare the terms offered by competing lenders)
The Home Ownership and Equity Protection Act (HOEPA) is an amendment to the Truth in Lending Act (TILA) that was passed in response to abusive mortgage lending practices rather than general lending practices...
It limits the scope of TILA by requiring lenders to report additional conditions relating to high-interest and high-fee home equity loans.)
The Real Estate Settlement Procedures Act (RESPA) is a law that governs how real estate (which requires lenders, brokers, and anyone else who services home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the transaction).
If you break these rules, you might face federal jail time and hefty penalties.
State statutes
Predatory lending offenses in California are more commonly charged as state crimes. Predatory lending isn't classified in the California Penal Code's enumerated offenses. Rather, it is a form of behavior that is illegal under a variety of rules, the most general of which are as follows:
Grand theft is punishable under Penal Code 487 PC.
You are in violation of Penal Code 487 PC. When you permanently deprive another individual or company of money or property worth more than $950, you are in violation of California's grand theft statute. If you paid high upfront costs as part of a loan plan, this would most definitely be the case.
This is referred to as a wobbler offense. Depending on the facts of the case and your criminal records, prosecutors will charge you with a misdemeanor or a felony.
If you are convicted of grand theft as a felony, you may face a sentence of 16 months, two, or three years in state prison, as well as a fine of up to $10,000. If you are convicted of the misdemeanor, you could face a year in county jail and a fine.
Theft with the intent to steal
If the prosecutor can show that you and at least one other person conspired to defraud a homeowner of more than $950, you could face additional charges of conspiracy to commit grand theft.
If you are found guilty of conspiracy, you will face the same penalty as if you were found guilty of felony grand theft.
PC 470 Penal Code California's anti-counterfeiting legislation
PC 470 Penal Code California's forgery law makes it illegal to intentionally change, create, or use a written document with the intent to defraud. This ensures that if you falsify loan documents (for example, by changing the borrower's income and therefore their ability to repay the loan), you will face additional forgery charges.
This is also a wobbler, with a maximum sentence of three years in state prison and a fine.
False marketing
California's false advertising statute, codified in Business & Professions Code 17500, forbids making false or misleading claims when advertising goods or services. If you are accused of predatory lending based on deceptive sales techniques that falsely enticed a borrower to receive or even seek a loan from you, you could be prosecuted under this statute.
If you are convicted, you will be charged with a misdemeanor, which carries a maximum penalty of six months in county jail and a fine.
Charges of various kinds
For the crime of predatory lending, you may face a number of additional fines, depending on the circumstances. If you broke into someone's home with the intent of engaging in predatory lending, you might also be charged with breaking California's burglary rule, Penal Code 459 PC.
You could face charges under Penal Code 422 PC criminal intimidation, Penal Code 240 PC battery, and/or Penal Code 646.9 PC stalking if you used threats or harassment to persuade the borrower to take out a loan from you or another predatory lender.
Any or all of the charges mentioned in this section will lead to your conviction. If you are accused of multiple offenses, the amount of time you spend in jail and/or prison will easily add up.
In California, predatory lending is a serious crime that can have serious consequences for both the lender and the borrower. If you are charged with this crime, we will help you challenge the state's facts to show that you were engaging in legal business practices.
If you are a survivor of a predatory lending scheme, remember that you have legal options. We will assist you in filing a civil case to recover damages, including any loan payments you've made as well as any litigation expenses.
Illegal property flipping
There's a lot of uncertainty these days about whether or not it's legal to "flip" a house.
Property flipping is, in most cases, a perfectly legal activity. The classic example is when a buyer buys a house for less than market value, typically because it requires a lot of maintenance or was sold as part of a short sale or foreclosure. The buyer then makes repairs and sells the property for a significant profit, far closer to the real market value, usually within a short period of time.
Illegal (criminal) property flipping, on the other hand, is on the rise. Perpetrators face state or federal prison terms as well as significant penalties, depending on how prosecutors prosecute the crime.
Those who usually engage in illicit property flipping
A variety of people may be involved in a fraudulent property flipping scheme. This may include (but are not limited to) the following:
purchasers of real estate (who buy with the intent to flip the property)
"Straw buyers" or people who agree to buy a property only in name.
without any hope of ever paying off the mortgage (these individuals may also be prosecuted for participation in a straw buyer scheme)
Brokers and agents in the real estate industry who are "in" on the con
real estate appraisers (who base their appraisals on unfinished home improvements or minor cosmetic improvements that are classified as major renovations)
Mortgage brokers (who process and file fraudulent loan documents and may be charged with a predatory lending scheme depending on the circumstances)
anyone else willing to draft or falsify documents in order to make the sale appear legitimate
Sentencing, Penalties, and Punishment
There is no clear legislation that prohibits illegal property flipping. Instead, it is illegal under a number of rules, which the prosecutor will examine to see which ones apply to the circumstances of your case.
The following are some of the most common crimes prosecuted in connection with a California illicit property flipping scheme:
Mail fraud
Fraudulent mail is a criminal offense. When you use the mail to commit some form of fraud, you are committing mail fraud. You could face a federal prison term of up to 30 years and a fine of up to $1 million if convicted.
Wire fraud
Wire theft is a criminal offense as well. When you use interstate wire communications equipment (phone lines, the internet, etc.) to commit fraud, you are committing this felony. If you are convicted of mail fraud, you will face the same penalty as those mentioned above.
Grand theft is punishable under Penal Code 487 PC.
You are in violation of Penal Code 487 PC. When you permanently deprive another individual or company of money or property worth more than $950, you are in violation of California's grand theft statute. This is referred to as a wobbler offense.
Depending on the facts of the case and your criminal records, prosecutors will charge you with a misdemeanor or a felony.
If you are convicted of grand theft as a felony, you may face a sentence of 16 months, two, or three years in state prison, as well as a fine of up to $10,000. If you are convicted of the misdemeanor, you could face a year in county jail and a maximum fine of $1,000.
Additional changes to sentencing
In addition to the above penalties and any other penalties that could be levied as a result of a conviction for this crime.
If you are convicted of participating in an illicit property flipping scheme in California, you will face serious consequences.
If you rob the lender of more than $65,000, you will face an extra one to four years in state prison.
If you defraud the lender of more than $100,000 and become convicted of two or more felonies involving fraud in the same criminal proceeding, you will face an additional one to five years in state prison and a maximum fine of $500,000 or double the amount of the fraud, whichever is greater (this penalty known as the aggravated white-collar crime enhancement may also be imposed on top of the original sentence).
If you have a California professional license, you will face discipline (given that criminal convictions can affect professional licenses, especially when the crime is classified as a crime of moral turpitude, which is typically the case with fraud offenses).
Rent Skimming
In Civil Code 890, the term "rent skimming" is described.
California's rent skimming statute, Civil Code 890, is one of the most popular forms of real estate fraud in the state. Rent skimming entails
collecting income without first paying your obligated debt (that is, using rent proceeds from your residential rental property at any point within the first year after purchase without first applying it, or an equivalent amount to your mortgage payments)
Renting out a property that you don't own or have permission to rent and paying the rent for your own use (which, depending on the circumstances, could result in additional charges under California's trespass law, Penal Code 602 PC).
You can only face civil penalties if you commit a single act of rent skimming. However, committing "many acts of rent skimming" is punishable both civilly and criminally. If you commit "multiple acts of rent skimming," it means you knowingly and willfully "rent skim" on any of five or more properties purchased within a two-year span. Consider one of our prescreened California Lawyers in your California Attorney Search.
Legal Defenses
The good news is that a professional California Criminal Defense Lawyer will offer a number of legal defenses to California's rent skimmer laws on your behalf. The following are a few of the most famous (but not all):
The rent was used to cover unexpected medical costs or to repair physical damage.
Rent skimming is permissible in some cases. If you pay healthcare providers for unexpected, urgent medical costs for yourself or your relatives, or if you use the money to pay licensed contractors or material suppliers to remedy breaches of law relating to the habitability of premises that you legally own, instead of using your rent to pay your loan (and you have no other source of income to pay those debts).
If you use the rent proceeds within 30 days of receiving them, you are not guilty of rent skimming under California Civil Code 890.
You weren't trying to defraud anybody.
The prosecutor must prove that you committed fraud in order to convict you of rent skimming.
Perhaps you were unaware that using the proceeds to pay for other expenses was illegal, or perhaps you were merely following the instructions of someone you thought was properly guiding you (who, it turns out, was using you to accomplish his or her criminal goal without your knowledge or consent).
You can be cleared of the charge if the prosecution cannot prove that you behaved with the real intent to defraud.
False allegations and misidentification
An innocent person may be wrongly accused of rent skimming or become the victim of mistaken identity for a variety of reasons. Perhaps someone who was unlawfully renting property was collecting rent checks in your name, in violation of California's identity theft laws.
Perhaps an employee of one of the financial institutions stole a portion of your rent money before documenting the rest of the payment. He accused you of rent skimming to cover up his own criminal culpability because he was under investigation for fraud.
Bargaining with a plea
There are moments, unfortunately, where the evidence against you is so overwhelming that it cannot be refuted. If this is the case, a professional Criminal Law Attorney in California may try to obtain a plea deal for a lesser conviction and/or punishment.
Sentencing, Penalties, and Punishment
If you are accused of a single act of rent skimming or multiple acts of rent skimming, you will face civil or criminal penalties. You may face civil and criminal penalties if multiple actions are suspected.
If you lose a civil case, you will be fined but will not be imprisoned. These penalties include reimbursing the victim for any real financial losses, compensation for fair attorney's fees, and punitive damages, which are imposed to punish you for your misconduct.
You will face a wobbler if you are accused of rent skimming as a felony. Depending on the facts of the case and your criminal records, prosecutors can charge you with a misdemeanor or a felony.
If you are convicted of this crime as a felony, you may face a sentence of 16 months, two, or three years in a California state jail, as well as a fine of up to $10,000. If you are found guilty of this crime as a misdemeanor, you will be fined the same amount and sentenced to one year in county jail.
You will be penalized for each additional act of skimming.
Similarly, if you have been convicted of several acts of rent skimming in the past, you will face the same penalty if you commit another crime. This means that if you were convicted of several acts of rent skimming in 2000, you would face the same penalty if you do it again today.
Straw Buyer Schemes
A straw buyer is someone who makes a purchase on behalf of someone else. If the offer is made to commit fraud, or if a person buys anything for another person who is unable to legally make the transaction on his or her own, it is called an illegal scam.
Under federal and state laws, straw buyers who purchase goods illegally, as well as those involved in an illegal transaction, can face criminal charges. Mortgage fraud, mail fraud, wire fraud, and forgery are some of the charges that an individual may face.
The above can result in misdemeanor or felony charges, and the penalties for these crimes can include hefty fines, as well as time in jail or prison. Those accused of straw purchasing can mount a legal defense to the charge. The defendant can prove that he or she did not have the intent to defraud, that he or she was subjected to an unconstitutional search and seizure, and that he or she was entrapped as three common defenses.
What is a straw mortgage, and how does it work?
A "straw mortgage" is a situation in which a straw participates in real estate transactions on behalf of another individual.
A common scenario is when a real estate agent or broker locates a person with good credit (i.e., the straw) who can secure a mortgage loan and help a person with bad credit purchase a house. The other person may be a straw's mate, a family member, a stranger, or even a made-up character.
The agent (or, in some cases, mortgage brokers) pays the straw buyer an advance fee in exchange for signing the loan application (or mortgage application) and other homebuyer paperwork. While the straw has no intention of staying in the house or making payments as a borrower of money, he accepts the money. Since the mortgage lender has no idea who the actual buyer or homeowner is, the act is considered fraud.
If the straw defaults on loan, the bank will foreclose on the house, resulting in the straw losing his or her good name, having to declare bankruptcy, and facing criminal charges (e.g., real estate fraud).
Scams involving straw purchases may include:
an agent who collaborates with appraisers to lift the price of a property being purchased
equity skimming
Property flipping that is not legal (where the agent and homeowner resell the property at a much higher price)
Is it illegal to buy a car for your child on the basis of a straw purchase?
Purchasing a vehicle for a child is not often considered a straw purchase. However, since the adult is purchasing the vehicle on behalf of the boy, it is a straw purchase. However, if the parent simply pays for the car on behalf of the child and then gives it to the child out of kindness, the gesture may be considered a legitimate gift.
Furthermore, if a parent (or a straw with good credit) co-signs a car loan with the child and offers to cover the loan sum or take over loan payments if the child defaults, the act is perfectly legal.
However, if a parent assumes a car loan for a child (usually with bad credit) and fails to notify the loan agency that the child will be in possession of the vehicle and liable for loan payments, the act can be considered criminal. If the parent obtains a loan for the car using someone else's personal details, he or she may be committing a crime.
What are the possible ramifications?
Under federal and state laws, illegal straw transactions will result in criminal charges.
The following are some of the crimes that a person may face if they join one of these fraud rings:
fraud via the mail
fraud via the internet
Foreclosure fraud
skimming for rent
forgery
grand larceny
Convictions under these statutes could result in felony or misdemeanor charges.
Find A Real Estate Fraud Attorney in California
If you need a California Lawyer for Real Estate and Mortgage Fraud Charges, 1000Attorneys.com is a California Bar Association Certified Lawyer Referral Service that can refer you to a fitting Criminal Law Attorney best fit to handle your case. Contact us through our 24/7 Live Chat (or complete our case review submission form) for a free initial consultation.
