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Mortgage Fraud Lawyer

Mortgage fraud involves risky financial speculation and harmful and unethical lending practices. In the early 2000s and during the Great Recession, mortgage fraud was a particularly destructive force in the American economy. Housing fraud schemes harm not only families and individual homeowners, but also the overall financial ecosystem and federal-funded mortgage programs. It can limit opportunities for advancement and siphon the resources of hardworking Americans’ into the pockets of banks and other lenders.

If you think your employer is committing appraisal fraud, asset rental fraud, or other kinds of misrepresentation or abuse, contact a qualified mortgage fraud lawyer today. There are substantial rewards and protections available for those who come forward to report housing fraud. Our team of expert attorneys at Tycko & Zavareei LLP can help you understand how you may recover funds as well as hold companies accountable for fraud by becoming a mortgage fraud whistleblower.

What is Mortgage Fraud?

Mortgage fraud occurs whenever a lender misrepresents, intentionally omits, or obscures important information about a loan in an effort to turn a profit. While individuals may commit housing fraud by lying about their assets to acquire or maintain property, this type of fraud is often perpetrated by entities to take advantage of those applying for mortgages. Typically, mortgage fraud is committed by bank officers, appraisers, and other industry insiders.

Common Types of Mortgage Fraud

The following are common housing fraud schemes:

  • False statements and material misrepresentation: Realtors, appraisers, and bank officials may make false statements, or intentionally hide or obscure key information from borrowers.
  • Appraisal fraud: Appraisal fraud often occurs when the value of a property is artificially inflated in order to increase the purchase price and, by extension, commission rates on a sale.
  • Asset rental fraud: This is a scheme designed to exaggerate or inflate the stated value of a borrower’s assets, thereby allowing a loan to be authorized at a different rate of interest than appropriate.
  • Violations of the Real Estate Settlement Procedure Act: This act requires lenders, mortgage brokers, and others to provide timely disclosures about the real estate settlement process. Violations may include receiving or offering kickbacks and unearned fees.

Mortgage fraud attorneys are trained to comb through the fine print and technical details of loan agreements to spot financial scams and unethical practices. You may reach out to our mortgage fraud lawyers for guidance on how to gather more information for your case.

Mortgage Fraud and the Great Recession

The Great Recession was a difficult financial crisis for many of us, especially homeowners. Unemployment doubled sharply, leaving more than 15 million people out of work during its peak. In the wake of the 2008 financial crisis, reporting housing fraud became more important than ever when it was revealed that predatory lending practices and the consolidation of banks and mortgage securities greatly contributed to the recession.

As mortgage fraud whistleblowers, you can help prevent another similar situation and hold bad actors accountable for their wrongdoings.

What Caused the Great Recession?

The Great Recession of 2008 was largely caused by widespread mortgage fraud and risky speculation practices such as the pursuit, bundling, and trading of subprime mortgages. Government-backed lending entities such as Fannie Mae and Freddie Mac played an outsize role by downplaying their portfolios of subprime mortgages. The Securities and Exchange Commission (SEC) charged former Fannie Mae and Freddie Mac executives with securities fraud in 2011 due to their role in the financial crisis.

Meanwhile, private banks actively sought out individuals who were at a higher risk of defaulting on their loans, and offered predatory and purposefully misleading terms and conditions to first-time homeowners. For consumers, this meant that while it was easier than ever to get a mortgage, the terms of the loans often concealed unending fees, balloon payments, or unexpected add-ons. This way a substantial amount of risky mortgage-backed securities was available for the financial market, with high liquidity and high origination fees. Due to their involvement with Fannie Mae and Freddie Mac, many of these seemed like they would be backed by the federal government if something went wrong, contributing to the “too big to fail” mindset of investors.

Examples of Mortgage Lender Fraud

The following represent certain mortgage fraud red flags that should raise suspicion in a borrower:

  • Misrepresenting the quality of the underlying loan
  • Using the identity of a previous customer to obtain a loan for someone who would be considered ineligible
  • Inflating property value
  • Falsifying credit scores
  • Using the wrong social security number
  • Falsely certifying loans as eligible for Federal Housing Administration insurance
  • Failure to meet Housing and Urban Development underwriting requirements
  • Overstating the borrower’s income
  • Failing to properly disclose the borrower’s assets and debt
  • Failing to perform due diligence on the underlying loans

If you have experienced or witnessed any of these, you may want to contact an experienced mortgage fraud lawyer immediately.

How to File a Mortgage Fraud Whistleblower Claim

The first step in deciding whether to report mortgage fraud is to hire an experienced qui tam attorney. The team at Tycko & Zavareei LLP can walk you through every step of the process for reporting mortgage fraud and ensure that an expert advocate is looking out for your best interests. A mortgage fraud attorney may be able to file your case under any of the following laws and programs:

  • Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA): Section 951 of the FIRREA allows the Department of Justice to bring and investigate civil complaints involving financial fraud. This 1980s law has recently been resurrected as a way to combat housing fraud.
  • False Claims Act: Individuals and companies that contract with the federal government or receive federal funding can be held liable for financial penalties if they make false claims. If the bank that holds your mortgage receives federal funds, there may be a way to hold them accountable using this powerful enforcement law.
  • Dodd-Frank Act: Housing fraud may also violate the Dodd-Frank Act, as it relates to the sale of “Residential Mortgage-Backed Securities,” or RMBs, and Collateralized Debt Obligations, or CDOs, that are based on faulty underlying loans. The Dodd-Frank whistleblower program, like the False Claims Act, offers whistleblowers up to 30 percent of the funds recovered in a successful mortgage fraud qui tam case.

Largest Mortgage Fraud Settlements

According to a study by the Institute for Research on Labor and Employment, over half of the largest firms in the mortgage-backed securities market were engaged in widespread mortgage fraud and predatory lending practices from 2008 to 2014. Out of 60 firms selected for the study, which included mortgage lenders, commercial and investment banks, and savings and loan associations, there were 43 predatory lending suits and 204 securities fraud suits settled, totaling nearly $80 billion in penalties, payouts, and reparations.

The following represent just a few of the settlements reached against well-known financial entities that misrepresented or otherwise defrauded investors and borrowers leading up to the Great Recession:

Mortgage Fraud Whistleblower Protections

Under certain federal and state laws, whistleblowers who come forward with information about financial or securities fraud are eligible for protection against retaliation by their employers.

For instance, under the False Claims Act as well as the Dodd-Frank Act, whistleblowers who have been fired for reporting fraud to the SEC are able to receive up to double back pay along with reinstatement. Front pay may be available in cases where reinstatement is not possible. Additionally, legal fees like attorneys’ fees, expert witness fees, and more can be recovered in a workplace retaliation claim.

Prohibited retaliations against protected whistleblowers include:

  • Firing
  • Demotion or suspension
  • Threats or harassment
  • An adverse change in working conditions, hours, or pay
  • Discrimination

Mortgage Fraud Whistleblower Lawyer: FAQs

The following represent some frequently asked questions about becoming a DOJ whistleblower, housing fraud penalties, and reporting mortgage fraud.

1. Can I remain anonymous as a mortgage fraud whistleblower?

Yes, reporting through a qui tam law firm will allow you to protect your anonymity as much as possible. However, there are some cases where your identity must be revealed on legal documents or in court settings. The SEC does everything it can to protect whistleblower anonymity, but filing with assistance from a qui tam lawyer is an important extra shield for whistleblowers who want to protect their identity and minimize the risk of employer retaliation.

2. How is mortgage fraud detected?

Oftentimes, mortgage fraud is reported by industry insiders who do the right thing and speak up. It may also be reported by competitors in the field who realize that other lenders or banks are getting ahead with unfair strategies. Because mortgage fraud often involves misrepresentation, it can be hard for those outside of the world of finance and banking to catch it until they have already been taken advantage of. Whistleblowers, on the other hand, can report previously undisclosed, private information to a qui tam law firm and bring a lawsuit to halt mortgage fraud and predatory lending before it goes too far.

3. Who investigates mortgage fraud?

For a mortgage fraud whistleblower complaint filed under the False Claims Act or a FIRREA violation, the Department of Justice leads the investigation. However, certain cases involving mortgage fraud are managed by the SEC. Understanding what area of the law applies and who leads the investigation are important reasons to consult with a mortgage fraud attorney when compiling your case. A mortgage fraud lawyer can also help you collect compelling evidence to help convince the proper authorities to look into your case.

4. What laws cover mortgage fraud?

Certain laws, including the Truth in Lending Act, require banks to be upfront about the fees they charge consumers. Banks that receive federal funding can be held liable under the False Claims Act or the FIRREA. Finally, the SEC Whistleblower Program under the Dodd-Frank Act covers mortgages that are sold as mortgage-backed securities.

5. Do mortgage fraud whistleblowers receive a monetary reward?

Yes, under the False Claims Act and the SEC Whistleblower Program, whistleblowers may be eligible to receive anywhere from 10 to 30 percent of the overall settlement in the event of a successful case. The SEC whistleblower payouts are mandatory.

6. What are the benefits of bringing a mortgage fraud case under the False Claims Act?

The False Claims Act meaningfully protects whistleblowers by offering a legal recourse in cases of employer retaliation. It also imposes high financial penalties, thereby increasing the potential whistleblower payout in successful cases.

7. When does mortgage fraud violate the Dodd-Frank Act?

Housing fraud violates the Dodd-Frank Act when mortgages are sold as securities, as precipitated the 2008 financial crisis. The Dodd-Frank Act is in place to increase transparency and stability in financial markets. When mortgages, particularly subprime mortgages, are traded as securities, whistleblowers should work with experienced qui tam attorneys to report such predatory practices.

8. Who can file a qui tam lawsuit?

Anyone can file a qui tam lawsuit, as long as they have original, unreported information that can point to fraud against the government. If you suspect mortgage fraud, you may want to speak to a whistleblower attorney soon regarding your case.

9. How long do whistleblower cases take?

According to the SEC’s FY 2020 Division of Enforcement Report, it takes a median of 21.6 months for the Department of Justice to open an investigation into a whistleblower claim. Many cases may last for years, as corporations attempt to avoid paying their fair share of fees and restitution. It is important to have a whistleblower attorney follow up on your case when reporting mortgage fraud so you may focus on your priorities while the case is being investigated.

10. Is whistleblowing ethical?

Blowing the whistle is an ethical, important, and patriotic act. Many people hesitate to come forward with information regarding mortgage fraud due to loyalty to their employer, fear of retaliation, or just being unsure about what to do.

If you have information about mortgage fraud, securities fraud, or other ways that your company is taking advantage of someone, the right thing to do is to speak up. Help level the playing field and ensure that others are not harmed by housing fraud.

Speak to an Experienced Mortgage Fraud Whistleblower Attorney Today

For a consultation about your case, contact the experienced qui tam attorneys of Tycko & Zavareei LLP today. We can handle the details of your case while looking out for your best interests every step of the way. Our qualified mortgage fraud whistleblower lawyers are available for a complimentary, confidential consultation.

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