There are many types of real estate fraud in California, just as there are many types of people involved in it. Whether you are a homeowner, investor, banker, developer or are involved in any way with real estate, at any level, you can find yourself involved in, or an unfortunate victim of, some type of fraud.
Take, for instance, the case of two former bank executives and an attorney in the Sonoma Valley area. The Press Democrat carries the story of their criminal trial for alleged actions that led to the bank's failure. The bankers gave the green light to $55 million dollars in loans to an area developer, who, with the help of an attorney, used "straw buyers," or phony investors, to obtain loans that mainly benefited themselves.
This trial follows a 2016 civil suit against the bankers and another executive brought by the Federal Deposit Insurance Corporation, which was settled for $5.4 million. Along with the bank's failure, more than 1,000 shareholders lost their investments due to the fraud, prosecutors are expected to argue.
According to FindLaw, use of straw buyers is just one type of mortgage fraud. Here are some common methods used to commit fraud:
- Silent second: Taking out a second, smaller loan to use as a down payment for the initial loan, which is typically much larger, without the knowledge of the first lender.
- Stolen identity: Using a false or stolen identity to apply for a mortgage loan.
- Equity skimming: Falsifying credit reports and income statements in the name of a straw buyer, who signs over the home to an investor who rents the home, pocketing the rent money, until the loan is foreclosed due to non-payment of the loan.
- Inflated appraisal: When an appraiser schemes with a loan officer to provide an appraisal that is overly high in order to obtain a loan.
California is one of several states with laws against different types of mortgage fraud, which can be prosecuted as misdemeanors or felonies, depending on the seriousness of the crime. Civil claims may also be sought for those involved in mortgage fraud, including claims against attorneys, mortgage brokers, appraisers and more.