California Mortgage Fraud & "Straw Buyer" Schemes

If you've been accused of being involved in a "straw buyer" scheme, you came to the right place for help.

As former police investigators and district attorneys, our California mortgage fraud defense attorneys1 understand the laws, the criminal justice system, and how to get you vindicated.

In the article below, we explain everything you need to know about how straw buyer schemes occur, the laws that regulate mortgage practices, the potential penalties and sentencing, and common legal defenses that lawyers invoke to protect their clients.

What Is A California
"Straw Buyer" Scheme?

Straw buyer schemes are among the most prevalent types of California real estate and mortgage fraud.  What typically happens in this type of scam is that a real estate agent / broker finds an individual with good credit...referred to as the "straw" buy a home for another person.  This other person may be a friend, family member, stranger, or even a fictitious individual who the agent explains simply can't acquire a loan because of his/her poor credit.

On average, the agent offers the "straw buyer" between $5,000 and $10,000 to sign the paperwork using his/her name and other personal information to secure the loan.  The straw buyer has no intention of ever living in the home or making payments on the home.  Some straws believe they are actually "doing good" by simply helping another less fortunate person (similar to a cosigner).  Other straws know they are involved in a criminal conspiracy.

The "players"

California straw buyer schemes may involve quite a few different parties.  Most notably, these include (but are not necessarily limited to):

  • a real estate broker / agent,
  • an individual looking to sell his/her home,
  • a homebuyer,
  • a "straw" buyer, and
  • a mortgage broker.

How the straw buyer scam works

Depending on the circumstances, the agent / broker may sell the home to the straw at an inflated price to achieve his/her goal of padding his/her commission.  Other times, the agent / broker will entice the straw buyer by telling the straw that he/she is helping a buyer purchase the home for a great deal...a deal that will allow the straw the opportunity to split the profit when the agent and owner resell the property at a much higher price.  Incidentally, this type of scam may also be referred to as illegal property flipping.

Mortgage brokers who are "in on the scheme" then process the false documents that allow the straw to purchase the property, even if his/her income wouldn't otherwise allow him/her to be able to make the purchase...which could also be considered a form of predatory lending.

The straw buyer then signs paperwork...often with the help of a notary who is also in on the scam.  This allows the notary to answer any questions so that the transaction appears to be legitimate, when an unsuspecting straw has questions.

The end result?  The real estate agent / broker, mortgage broker, notary, and anyone else who was involved collects the loan proceeds while the straw unknowingly assumes the mortgage.  When he/she doesn't pay, the bank forecloses on the property, and the straw

  • loses his/her good credit,
  • must typically declare bankruptcy, and
  • faces possible criminal charges.

The types of charges you face for involvement in a straw buyer scam

Many of the charges that are based on these types of mortgage fraud cases are federal in nature.  Examples of these federal crimes include mail fraud, wire fraud, and a variety of other white collar crimes.2

Some common California state charges that may be filed for involvement in straw buying schemes include (but are not limited to) violations of:

Penalties, punishment and sentencing for straw buyer schemes

Which offense(s) prosecutors charge you with will determine the exact penalties that you face.  Most, if not all of the above offenses are considered "wobblers" which mean that prosecutors could charge them as misdemeanors or felonies, depending on

  1. the facts of the case, and
  2. your criminal history.

The punishment for a misdemeanor conviction is typically up to a year in a county jail and a maximum $1,000 fine.  The punishment for a felony violation is typically up to three years in the California state prison and a maximum fine of $10,000.3

And, as San Jose criminal defense attorney Cameron Bowman4 explains, "You could additionally face professional discipline, as many criminal convictions can affect professional licenses...especially when the crime is classified as a crime of moral turpitude which is typically the case with California fraud offenses."4

Call us for help...
Img call help

If you or loved one is charged with a straw buyer scheme and you are looking to hire an attorney for representation, we invite you to contact us at Shouse Law Group. We can provide a free consultation in office or by phone. We have local offices in Los Angeles, the San Fernando Valley, Pasadena, Long Beach, Orange County, Ventura, San Bernardino, Rancho Cucamonga, Riverside, San Diego, Sacramento, Oakland, San Francisco, San Jose and throughout California.

Additionally, our Las Vegas Nevada criminal defense attorneys are available to answer any questions about Nevada's mortgage fraud laws. To learn more about Nevada straw buyer laws, read our article on Nevada straw buyer laws. For more information, we invite you to contact our local attorneys at one of our Nevada law offices, located in Reno and Las Vegas.6

Legal References:

1Our California mortgage fraud defense attorneys have local Los Angeles law offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, Torrance, Van Nuys, West Covina, and Whittier.  We have additional law offices conveniently located throughout the state in Orange County, San Diego, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.  Please contact us at Shouse Law Group for a free consultation.

2Offenses such as mail fraud and wire fraud are federal crimes.  Our California criminal defense attorneys are here to represent you in federal court and are experienced in this venue as well.  White collar crimes may be charged as state or federal crimes, depending on the specific facts of the case.

3California Penal Code 19 PC -- Punishment for misdemeanor; punishment not otherwise prescribed.  ("Except in cases where a different punishment is prescribed by any law of this state, every offense declared to be a misdemeanor is punishable by imprisonment in the county jail not exceeding six months, or by fine not exceeding one thousand dollars ($1,000), or by both.")  As "wobblers" the types of crimes associated with California straw buying schemes typically include up to one-year in a county jail, rather than the typical six-month sentence that may be imposed in connection with a "standard" misdemeanor.

See also Penal Code 18 PC -- Punishment for felony not otherwise prescribed; alternate sentence to county jail.  ("Except in cases where a different punishment is prescribed by any law of this state, every offense declared to be a felony, or to be punishable by imprisonment in a state prison, is punishable by imprisonment in any of the state prisons for 16 months, or two or three years; provided, however, every offense which is prescribed by any law of the state to be a felony punishable by imprisonment in any of the state prisons or by a fine, but without an alternate sentence to the county jail, may be punishable by imprisonment in the county jail not exceeding one year or by a fine, or by both.")

See also Penal Code 672 PC -- Offenses for which no fine prescribed; fine authorized in addition to imprisonment.  ("Upon a conviction for any crime punishable by imprisonment in any jail or prison, in relation to which no fine is herein prescribed, the court may impose a fine on the offender not exceeding one thousand dollars ($1,000) in cases of misdemeanors or ten thousand dollars ($10,000) in cases of felonies, in addition to the imprisonment prescribed.")

4San Jose criminal defense attorney Cameron Bowman defends clients throughout Northern California which includes (but is not limited to) the Santa Clara, Contra Costra, San Francisco and Alameda County courthouses.

5To learn more about how criminal convictions can affect professional licenses...especially with respect to crimes of moral turpitude...please visit our pages on professional license issues (which are organized by individual professions).

6Please feel free to contact our Nevada criminal defense attorneys Michael Becker and Neil Shouse for any questions relating to Nevada's workers' compensation laws. Our Nevada law offices are located in Reno and Las Vegas.


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