When the Officer Isn’t a Gentleman: Understanding Loan Fraud

To continue our month-long examination of white-collar crimes, we’re going to explore the various ways a loan officer or borrower can commit loan fraud. Similar to other white-collar crimes, a lot of money continuously circles this industry, from mortgage brokers, agents, appraisers, and officers. With proper documentation and distribution of financial information, this money goes where it should. As we saw in the 2008 subprime crisis, when white-collar criminals commit loan fraud, the ramifications can be catastrophic, tanking not only a person’s bank account but the whole economy.

Prison time for loan fraud can total decades, so it’s important to know what constitutes “intent” and what to do if you believe you’ve participated in it. Similar to how both patients and doctors can commit healthcare fraud, buyers, sellers and loan officers, including people in their network, can commit loan fraud.

Even in the early stages of the loan process, borrowers can lie on their application documents to secure a larger amount of money than which they would’ve normally qualified for. Those wishing to drastically modify their financial situation can end up committing another crime during the process: identity theft. In this instance, perpetrators illegally utilize someone else’s more positive financial situation to boost their standing and acquire financing.

The most adroit identity theft criminals can steal everything from someone’s social security number, banking information, credit card numbers, and other forms of identification. Such duplicity can wreak devastating effects upon the victim. The person accessing this highly personal information suddenly has incredible access and means to digitally alter bank statements, verifications, or other documents the loan officer would use to confirm the legitimacy of financial accounts.

Of course, other forms of loan fraud may not always be so advanced. For example, one may commit loan fraud by intentionally inputting a wrong number representing income or assets, or in the supporting documentation.

Now, when it’s the other way around—when someone in the system is committing fraud—they, like doctors at a hospital, have much more access to numbers, names, and potential sources for manipulation. For example, flipping houses can be perfectly legal. But if an agent buys a home below its value, then immediately sells it for a major profit (usually due to someone in on the scheme, like a fake appraiser), then this is fraud. Likewise, you may have heard of “predatory lending.” This occurs when an officer deliberately misleads a prospective borrower into a loan they are not capable of repaying or misrepresents important financial information to profit off another’s ignorance.

With the FBI handling most cases, the consequences of loan fraud are severe. Not only can convictions lead to decades of prison time, they may also result in millions of dollars’ worth of fines and the loss of a professional license. Based on these penalties, it should go without saying if you’ve become the target of an investigation, or you believe you’ve deceived a buyer or seller and need legal counsel, you shouldn’t hesitate to contact a criminal defense lawyer. My firm is experienced in these matters and can help you understand your options. Don’t hesitate to contact me with questions; I am here to help.

Also, if you’d like more information, click here for my video on “What Not To Do If You’re Under Investigation”

Chase Geiser