"Mortgage Fraud Schemes" in Nevada (NRS 205.372)
Explained by Las Vegas Criminal Defense Lawyers

The Nevada crime of mortgage fraud takes many forms. Some involve a lone defendant while others are complex schemes where many defendants conspire together.  Both extremes and everything in between carry up to decades in prison and tens of thousands of dollars in fines.

This article summarizes common mortgage fraud schemes in Nevada including straw buyer schemes and illegal house flipping.  Continue reading to learn the basic dynamics of each scheme. For a general overview of mortgage fraud law including penalties and how to fight mortgage fraud charges, read our article on the Nevada crime of mortgage fraud.

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(Click on a title to proceed directly to that type of mortgage fraud)

• Straw buyers
• Shotgunning
• Income and Liability Fraud
• Occupancy Fraud
• Identity Theft
• Commercial real estate loans
• Loan modification scams
• Foreclosure rescue scams
• Unlawful property flipping
• Escrow Fraud
• Appraisal over-valuing
Common Nevada Mortgage Fraud Schemes

Like it sounds, mortgage fraud occurs when a person deliberately carries out (or tries to carry out) a dishonest mortgage fraud transaction.1 The types of suspects in mortgage fraud schemes can be divided into two broad categories:

  1. People trying to buy or hold onto homes, or
  2. People trying to sell homes or mortgages.

Either way, a fraudulent mortgage fraud transaction typically involves the suspect giving false financial information in an effort to obtain money or property he/she otherwise may not be entitled to.

1) Mortgage fraud perpetrated by homebuyers or their agents
    • Straw buyers: Straw buyers are people who pose as desirable home buyers but never intend to live in the home or pay off the mortgage.  In many scenarios, these straw buyers pocket the mortgage loan and quitclaim the property to an investor who allows the property to go into foreclosure.  Learn more in our article about the Nevada crime of mortgage fraud.
    • Shotgunning: This is when a homeowner secures several mortgage loans for the same property, and the sum of the loans far exceeds the property value. Then if the homeowner forecloses while the property value remains low, the secondary mortgagers may be unable to collect against the property.
    • Income and Liability Fraud: Like it sounds, income fraud occurs when homebuyers claim they earn more and owe less than they really do in order to qualify for a mortgage. Mortgage companies try to prevent these "liar loans" by relying on the homebuyer's IRS transcripts as opposed to W2 forms and bank account statements, which the homebuyers may try to forge. Laughlin criminal defense attorney Michael Becker explains:
Fred is in between jobs and wants to buy a home in Las Vegas. On his mortgage application he lies that he is self-employed and doctors his bank account statement to show he's getting paid for work he hasn't done.  If caught, Fred could be booked at the Clark County Detention Center for mortgage fraud because he knowingly provided false information in order to secure a mortgage he was unqualified for.
  • Occupancy Fraud:  Mortgage lenders usually charge higher interest rates for properties that are not occupied by the owner.  Therefore occupancy fraud occurs when homebuyers lie about using the home as their primary residence in order to obtain the lower interest rate.
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  • Identity Theft: A person who assumes another's identity without the victim's consent to secure a mortgage commits identity theft.  Typically the identity thieves then flee with the loan money, and the lender attempts to collect mortgage payments from the victim.
  • Commercial real estate loans: Here, distressed owners of commercial real estate create fake leases in order to inflate their property's worth.  This tricks mortgage companies into giving the commercial real estate owners loans they're not qualified for.
2) Mortgage fraud perpetrated by home sellers, mortgagers, appraisers, or escrow agents
    • Loan modification scams: Scammers promise distressed homeowners that they will renegotiate their home loans if they pay them a large fee upfront. Then the scammers either don't follow through on their promises or negotiate
      worse loan terms than before.  Learn more about the Nevada crime of predatory lending
  • Foreclosure rescue scams: These scammers prey on homeowners who have defaulted or may soon default on their mortgages.  The scammers claim they can save their homes if they transfer the property to another investor, and that the homeowners can repurchase the homes once they reestablish their credit. In reality, the scammers abscond with the fees the homeowners paid them, the mortgage never gets paid, and the property gets foreclosed on.  Other names for this kind of scheme include "phantom help," "bailout," and "bait and switch."  Learn more in our article about the Nevada crime of foreclosure fraud.
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    • Unlawful property flipping: Flipping means to buy a property and to resell it in the hopes of making a profit. Legitimate flippers usually make improvements to the property in order to justify making a profit in the resale.  Flipping becomes illegal when the flipper has the property appraised at a higher value than it's worth.  Often the flipper pays the appraiser to lie.  In this scenario, both the seller and appraiser would face prosecution.  Learn more in our article about the Nevada crime of illegal property flipping.
    • Escrow fraud: These mortgage fraud cases involve escrow officers who conspire with the mortgage lender and/or borrower to profit from a
      second, fraudulently obtained mortgage. North Las Vegas criminal defense attorney Neil Shouse illustrates with an example:
Jack buys a Las Vegas home on mortgage but instructs the escrow coordinator John to hold back some of the purchase money from the seller for a few months.  During that time, the buyer uses that money to keep the mortgage current and to take out a second mortgage.  Then Jack and John pocket the cash from the second mortgage and let the house go into foreclosure.  If caught, Jack and John could be booked at the Clark County Detention Center for mortgage fraud.  John acted unlawfully by holding back the escrow money, and Jack acted unlawfully by using that money to secure a second mortgage he otherwise wouldn't be entitled to.
  • Appraisal over-valuing: In this scheme, home sellers bribe appraisers to overstate the value of the home.  This allows the sellers to obtain more money through selling the home or through a cash-out refinance. Often the seller gives the appraiser "kickbacks" from money obtained through the home sale or refinance.
Accused of "mortgage fraud" in Nevada? Call a lawyer . . . .
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Have you been charged with committing the Nevada crime of "mortgage fraud"? Contact our Las Vegas criminal defense lawyers at 702-DEFENSE (702-333-3673) to discuss for free how we may be able to get your charges dismissed or reduced. We're also ready to fight for your innocence should you wish to take the matter to trial.

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.

1NRS 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.).




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