Federal Real Estate Fraud

This is usually charged at the state level in California under Penal Code 487 PC. The essential elements for the prosecution to prove are that someone does the following:

1. Intentionally defrauds someone of money or property worth over $950.00; and
2. This is done through intentional false promises or representations or misrepresentations.

In addition, although the laws and theories vary in different states, the prosecution generally has to prove the following:

1. The alleged offender intentionally deceived someone who owns real estate or a mortgage lender;
2. Such deception was accomplished by stating false promises; and
3. The victim of the crime relied on the promise or gave the accused his or her property or money.

Let’s assume Mary owns a condo and has $100,000 of equity in the property. However, she has suddenly fallen on difficult financial times and can no longer pay her mortgage payments. Because of this, she is now at risk of foreclosure on the condo. She learns of a business owned by Oliver that allegedly specializes in “foreclosure consulting.” Oliver assures her that he can prevent foreclosure if he negotiates with the bank that gave her the loan. (He has no intention of doing this, so it is a “false promise.”) He also tells her he will negotiate with the lender, but only if she agrees to sign documents that give him the authority to act on her behalf in the negotiations. Mary signs the documents that Oliver sent her but does not realize she signed a deed that transferred the title of her condo to Oliver. Oliver now owns the equity in Mary’s condo, which he obtained by misleading her. Oliver has committed theft by false pretense.

(An example will be shown later that he also committed foreclosure fraud).

It should be noted that if he had actually negotiated with the bank or financial institution with the intent to ultimately deceive Mary in some other way, this would be prosecuted at the federal level since a financial institution would have been involved if Oliver had contacted the bank.

Foreclosure Fraud

Under California law, this is prosecuted under Civil Code Section 2945.4.

Essentially, the prosecution has to prove the accused committed any of the following:

1. Charged the real estate owner for services before providing any service;
2. Ultimately charged or collected excessive fees for such services;
3. Actually took a legal interest in the real estate that was subject to foreclosure;
4. Took money from any third party for these services and failed to disclose this to the owner;
5. Took power of attorney from the property owner; or
6. Defrauded the owner into signing an illegal contract related to the property.

Please refer to the previous example of Mary and Oliver. Oliver is guilty of foreclosure fraud because he obtained a legal interest in Mary’s condo through his foreclosure services when she signed the deed under false pretenses.

Note that Oliver would also be guilty of foreclosure fraud if he charged Mary an excessive fee for his services or took money from a third party for his services and failed to disclose the information to Mary.

Rent Skimming

Under California law, this is prosecuted under Civil Code Section 890.

There are two ways in which someone could be prosecuted for this crime.

Under the first scenario, a person would be guilty of the crime if the accused did the following:

1. Rented residential property during the first year that the property was acquired; and
2. Failed to apply those proceeds to the mortgage.

Under the second scenario, the defendant would have to do the following:

1. Pretend to own property that he or she does not actually own;
2. Rent the property fraudulently without the right to do so;
3. Keep any of the rental proceeds.

It should be noted that most states only consider rent-skimming a crime if it is committed on more than one occasion. However, a one-time act of rent-skimming could subject a defendant to a civil suit.

Forged Documents

In California, this is prosecuted under Penal Code 115 PC.

The law states that it is a crime for an individual to do the following:

1. Intentionally file, record, register a forged or false document; and
2. File the document with a governmental office, such as a county clerk’s office.

Examples of this type of fraud would be filing a forged deed.

While these are some of the most common types of real estate fraud, other examples would include the following:

1. Phantom Help Scam; (Foreclosure assistance company promises an individual who owns real estate that they can avoid foreclosure with an upfront fee, takes the money, but performs no service. After that, the homeowner is unable to prevent the foreclosure);
2. Straw Buyer Schemes; (The actual buyer cannot purchase the property for a particular reason, for example, they have bad credit. Thus, a straw buyer is used. If this transaction defrauds someone, or it is unlawful for the genuine buyer to purchase the property, this is a crime)
3. Illegal Property Flipping; (Fraudulently inflating the value of the property at the time of the appraisal so that an innocent person buys the property at the inflated price and the bank lends money on the real estate property for more than its actual value). Again, this would elevate the crime to prosecution at the federal level since a financial institution, the bank, is involved. (This is not a crime if a person buys a home, makes significant changes or improvements to the house, and resells it at a higher price)
4. Predatory Lending; (A mortgage broker creates the loan for a buyer and does so with unnecessary fees that do not benefit the borrower).

Federal Real Estate Fraud Sentencing

There are many different types of sentencing for convictions of this crime.

As stated above, these crimes are wobblers, meaning they can be charged either as misdemeanors or felonies, with felonies carrying harsher penalties.

For example, misdemeanor grand theft would be punishable for up to one year in county jail. ‘

A felony conviction would be punishable by a maximum jail sentence of three years. Foreclosure fraud carries the same penalties as does rent skimming. However, it should be noted that a one-time offense of rent skimming does not lead to criminal charges; a one-time rent skimming act would subject someone to civil penalties. If you file forged documents, such as a deed, this is a felony and punishable in county jail for up to three years as well as a fine of up to $10,000.

Fighting/Defending Federal Real Estate Fraud

You need an experienced federal defense attorney to assist you in defending against these serious crimes and potential convictions and penalties.

In most of these cases, the prosecution must prove intent to defraud. However, their case will attempt to show that a defendant knowingly intended to defraud a person or business. The best way for the defense to defend against such accusations is to show that the defendant made a mistake and did not intend to defraud anyone.

Real estate transactions are complicated and full of intricate nuances during the often-complicated process of buying or selling real estate. Many documents are filed, lengthy contracts are signed which may be difficult to understand, and information is obtained to secure a loan. Some individuals may sign something by accident without knowing precisely what is being signed. Others may provide inaccurate information to a lender simply through an innocent mistake.

When there is no intent to defraud, there is no crime. This will be the cornerstone of your defense in fighting a real estate fraud charge.

An experienced defense attorney can help you prepare the best possible defense to challenge the prosecution’s case.

We Want to Help

If you are being charged with real estate fraud, either on the state level or federal level, in the Los Angeles area, contact us today for a free consultation. Your freedom depends on finding an experienced defense attorney immediately. The sooner you reach out, the sooner we can work on your legal defense which may involve avoiding an arrest or charges being filed. Assuming charges have already been filed, an experienced defense attorney can potentially have your case drastically reduced or dismissed entirely.

If you or a loved one is being charged with real estate fraud, we invite you to contact us immediately for a free case review.

Our experienced and assiduous attorneys will be sure to fight until the end to protect your interests and possibly reduce or drop your charges entirely.

Call Us for a FREE Case Review: 310-274-6529