The housing crisis hit Nevada harder than any other state. Inevitably prosecutors are cracking down on allegations of mortgage fraud, which is punished just as harshly as drug crimes. But a skilled Nevada criminal defense lawyer may be able to get these criminal charges reduced or dismissed altogether.
This article discusses the Nevada crime of mortgage fraud and related federal laws. Continue reading to learn about common mortgage fraud schemes, potential defenses to criminal charges, and possible penalties.
Legal definition of "mortgage fraud" in Nevada
Broadly speaking, the legal definition of "mortgage fraud" in Nevada is when someone perpetrates a deceptive mortgage transaction.1 The "fraud" usually involves providing false financial information. The typical motive behind the fraud is monetary gain.
Mortgages are very complicated multi-step transactions that involves some or all of the following players:
- A homebuyer
- A homeowner
- A loan officer
- A mortgage broker
- A real estate agent
- An escrow agent
- An appraiser
Sometimes only one of these players carries out mortgage fraud. Sometimes many of them work in cahoots to advance the fraud. Either way, any dishonest act that materially affects a mortgage lending transaction may qualify as criminal fraud.
Common mortgage fraud schemes in Nevada
- False loan modification schemes. This occurs when distressed homeowners receive bogus offers to refinance their homes, reduce their principal loan and prevent foreclosure. The offenders often demand large fees upfront and then fail to deliver on the services they promised, leaving the homeowners worse off than before.
- False loan applications. Homebuyers who lie on their mortgage applications about their income, debts, identification or intentions to honor the mortgage are committing fraud. Sometimes loan officers lie about homebuyers' information in order to secure a commission from completing the mortgage.
- False appraisals. It is fraud when home sellers bribe appraisers with kickbacks or other incentives to inflate the home's value. If the appraiser accepts the bribe, then both the home seller and appraiser could be prosecuted for mortgage fraud.
Note that filing a mortgage document with the county recorder, when the person knows the document contains misinformation, is mortgage fraud as well. Furthermore, any person who knowingly receives proceeds from a fraudulent mortgage transaction is liable irrespective of whether that person was a party to the mortgage.3 Mesquite criminal defense attorney Neil Shouse illustrates how this can work:
EXAMPLE: Jake is a home appraiser in North Las Vegas who owes back rent to his landlord. His landlord suggests he gives his clients exaggerated appraisals in exchange for charging extra money, which Jake would then give to his landlord to pay off the rent. If they attempt this scheme and get caught, both Jake and the landlord could be booked at the North Las Vegas Detention Center for mortgage fraud. Since the landlord knowingly took money that he knew came from a fraudulent mortgage transaction, he is equally as liable as Jake.
Also note that each fraudulent mortgage lending transaction constitutes a separate violation in Nevada.4 This means one person can potentially be charged with several counts of mortgage fraud concerning the same property and with the same lender or borrower.
Specialized mortgage fraud schemes in Nevada
There are literally dozens of different types of mortgage fraud schemes in Nevada including the Nevada crime of straw buyer schemes, the Nevada crime of illegal property flipping, the Nevada crime of foreclosure fraud, and the Nevada crime of predatory lending. For more information about these and other fraudulent mortgage schemes, read our article about mortgage fraud schemes in Nevada.
Federal mortgage fraud laws
Mortgage fraud is not only a Nevada crime but also a federal crime investigated by the FBI.5 The main difference between state and federal law is that the federal government usually prosecutes mortgage fraud allegations as mail fraud, wire fraud and/or bank fraud:
- The federal crime of mail fraud in Nevada using the mail to send or receive documents related to a fraudulent mortgage. Penalties include up to 20 years in a federal prison and a fine.6
- The federal crime of wire fraud in Nevada is using wire communications such as the phone to send or receive information about a fraudulent mortgage transaction. Penalties include up to 20 years in a federal prison and a fine.7
- The federal crime of bank fraud in Nevada is intentionally defrauding a financial institution in relation to a mortgage fraud transaction. Penalties include up to 30 years in prison and/or $1,000,000 in fines.8
Depending on the mortgage fraud case, prosecutors may choose to bring charges in Nevada state court or federal court. Defendants may also face federal charges for giving false statements, making false loan applications, or giving fake identification information.9
Investigating mortgage fraud allegations
Banks file suspicious activity reports (SARs) with law enforcement when they suspect a mortgage transaction may be fraudulent.10 Law enforcement then employs various information-gathering methods such as tapping phones, undercover agents, and statistical analysis to investigate the allegations. If law enforcement believes fraud may have occurred, they turn the case over to prosecutors.
Defenses to "mortgage fraud" in Nevada
Mortgage fraud is a "specific intent" crime in Nevada, which means a defendant should not be convicted unless he/she had intent to defraud. Henderson criminal defense attorney Michael Becker gives an example:
Example: Carrie applies for a second mortgage in Henderson. By accident she types the decimal place wrong so it appears Carrie is earning ten times more than what she actually does. If caught, Carrie may be booked at the Henderson criminal defense attorney for mortgage fraud. But if prosecutors cannot show that Carrie gave the misinformation on purpose, the charges should be dropped.
Note that Nevada courts are likely to be sympathetic to distressed homeowners such as Carrie in the above example. The real estate market is extremely confusing, so judges understand that the common person is likely to make innocent mistakes. Conversely, courts are less sympathetic to industry insiders such as mortgage brokers and appraisers who should not be prone to such errors.
Another defense to mortgage fraud is lack of evidence such as documentation or witnesses. As long as the state cannot prove beyond a reasonable doubt that the defendant committed fraud, then he/she should not be held liable.
Defendants in mortgage fraud cases can also claim that the police executed an illegal search and seizure to obtain the evidence. In such circumstances the defense attorney would file a Nevada motion to suppress evidence, which asks the court to disregard all the unlawfully procured evidence.11 If the judge agrees that the police overstepped their bounds and grants the motion, then the entire case may be dismissed for lack of proof.
Penalties for "mortgage fraud" in Nevada
Violating NRS 205.372 is a category C felony in Nevada. The standard sentence for a conviction includes:
- 1 to 10 years in Nevada State Prison, and/or
- up to $10,000 in fines
Meanwhile "a pattern" of mortgage lending fraud is punished more seriously as a category B felony in Nevada carrying a punishment of:
- 3 to 20 years in Nevada State Prison, and/or
- up to $50,000 in fines
Either way, the court may also levy a civil fine of up to $5,000 for each violation. Defendants are also ordered to pay restitution in Nevada to the victims of the mortgage fraud.
Arrested for "mortgage fraud" in Nevada? Call a lawyer . . . .
Have you been accused of violating "Nevada mortgage fraud law"? Call our Las Vegas criminal defense lawyers at 702-DEFENSE (702-333-3673) for a free consultation to discuss your options and how we can help. We may be able to negotiate down the charges, or else we will fight zealously for a "not guilty" verdict at trial.
Go back to our main page on Nevada fraud crimes.
We represent clients throughout Nevada, including Las Vegas, Henderson, Washoe County, Reno, Carson City, Laughlin, Mesquite, Bunkerville, Moapa, Elko, Pahrump, Searchlight and Tonopah.
For information on California mortgage fraud law, go to our page on California mortgage fraud law.
1 NRS 205.372 - Mortgage Lending Fraud; penalties; civil actions (It's a crime for a participant in a mortgage transaction to defraud or attempt to defraud another by knowingly lying about or omitting a material fact or by profiting from a mortgage transaction that he/she knows is fraudulent.).
2Nevada Attorney General Masto Identifies Top 5 Mortgage Fraud Consumer Complaints, Home Again: Nevada Homeowner Relief Program, (2012).
3NRS 205.372(1)(e) - Mortgage Lending Fraud; penalties; civil actions ("A person who is a participant in a mortgage lending transaction and who ... (f)iles or causes to be filed with a county recorder any document that the person knows to include a misstatement, misrepresentation or omission concerning a material fact, commits the offense of mortgage lending fraud....").
5 Mortgage Fraud: These Scams Hit Us Right Where We Live, Federal Bureau of Investigation (2013).
9 18 U.S.C. § 1001 - Making False Statements in general; 18 U.S.C. §1014 - Making False Statements in Credit or Loan Applications, 18 U.S.C. §1028 (Identification Fraud); and 18 U.S.C. §1342 - Fictitious Names or Addresses.
10 Suspected Mortgage Fraud, FinCEN: Financial Crimes Enforcement Network, (2013).
11 NRS 179.085 - Motion for return of property and to suppress evidence ("A person aggrieved by an unlawful search and seizure may move the court having jurisdiction where the property was seized for the return of the property and to suppress for use as evidence anything so obtained....").