NRS 205.372: Mortgage Fraud in Nevada—Definition, Penalties, Defenses

We all remember the mortgage crash of 2008 and the era of robo-signers. Almost anyone could obtain a home loan, even if they couldn’t afford it.

This caused widespread chaos throughout the banking industry and destroyed home values and took many long-standing banking institutions to their knees. As dramatic as this sounds, if you were around at that time and owned a home with a mortgage, then you may understand what we’re talking about. 

This all happened due to fraudulent loans or loans that shouldn’t have been given to people who could not afford the mortgage. Giving false appraisals on a property to have it appear worth more than it actually is to secure refinancing or a mortgage at a higher rate. 

These practices resulted in banks appearing wealthier on paper, which in turn drove up stock prices. While this may sound confusing, it occurred quite some time ago. Consequently, it prompted significant changes in laws governing the mortgage industry and the issuance of mortgage loans.

Some of the CEOs of the big banking industry companies that defrauded the public in 2008 only got a slap on the wrist and a fine. 

That has since changed due to the 2008 crash. 

Today, mortgage fraud is a felony and can land someone in prison for 20 years.

Mortgage fraud has many forms as well, not just loan fraud.

If you or someone you know is facing mortgage fraud, or any white collar crime, you need to contact an experienced criminal defense attorney. The Defenders is a criminal defense firm based in Las Vegas and has been defending clients in Nevada for many years.

Contact our office today for a free case evaluation.

What Is Mortgage Fraud in Nevada

Mortgage fraud is a very broad term that has many layers. 

Since mortgages by nature are all multi-transactional processes that involve more than one person or institution, mortgage fraud can involve one or more businesses or persons. Mortgage fraud is usually used for monetary gain. Mortgage fraud, generally speaking, is any dishonest act involving a mortgage that materially affects a mortgage lending transaction leading to a deceptive mortgage transaction. 

This may sound complicated but there are some more common mortgage fraud schemes in Nevada.

False Loan Modification

A false loan modification is when a person or business modifies a mortgage that doesn’t belong to them. This can be done by forging documents, using another’s identity, or other methods of deception.

For instance, if a homeowner is in some sort of financial distress and can’t pay the mortgage for some reason like loss of employment, the homeowner may receive offers to refinance the loan or reduce principal or prevent foreclosure by refinancing the loan.

For example, this man solicited victims who paid him thousands of dollars in upfront fees to obtain loan modifications on their behalf.

These are often private companies that have no affiliation to the actual lender or bank that owns the loan. This scheme often involves having the homeowner pay large sums of money up front and never delivering on the refinance or other financial promises.

Mortgage transactions are available to the public so any company or person can look up your mortgage information. This scheme often exacerbates homeowners’ financial distress. Already struggling with their mortgage, they end up spending money on a refinancing attempt that never materializes.

False Loan Applications

Fraudulent loan applications involve providing false information to secure a mortgage. Typically, this false information pertains to income, debt, identity, and repayment intent.

For example, someone may provide a false pay stub or tax return to show a higher income, inflate their assets, or understate the amount of debt they currently have. These fraudulent practices can result in obtaining mortgages that the person would not qualify for otherwise.

In some instances, loan officers may falsify details to ensure loan approval and earn a commission. This practice was a significant factor in the 2008 financial crisis, as it led to people obtaining loans they couldn’t afford.

False Appraisals

False appraisals involve manipulating the value of a property to secure a higher loan amount. This is often done in collusion with an appraiser, through a bribe or other incentive, who can falsely inflate the value of the property through misleading or false information.

If the appraiser accepts the incentive all parties involved in the process can be charged with mortgage fraud.

Filing Documents That Contain Misinformation

If you knowingly file mortgage documents that contain misinformation with the county recorder, who is responsible for all documentation of a mortgage application you are also guilty of mortgage fraud.

Receiving Money From a Fraudulent Mortgage Transaction

If you knowingly receive money or other proceeds from a fraudulent mortgage transaction, you may be liable and charged with mortgage fraud even if you did not take part in the transactions.

In many cases there is more than one of these that constitutes mortgage fraud. Each transaction leading to the fraud is considered a separate violation of NRS 205.372.

Nevada Mortgage Fraud vs Federal Mortgage Fraud

Mortgage fraud is both a Nevada crime and can be a federal crime. 

In Nevada, crimes of mortgage fraud usually fall into several categories including:

• Straw buyer schemes: This is typically when one person takes out a mortgage for someone else who does not qualify.
• Illegal property flipping: Property flipping is legal in Nevada unless the flipper engages in fraud to distort the true property value.
• Foreclosure Fraud: This usually occurs when a person who is facing foreclosure uses a consultant to stop or delay foreclosure. The consultant charges fees for this service and may not deliver on the promise.
• Predatory lending: giving loans to people who don’t qualify or understand the loan terms using aggressive tactics. Using outright deception to get a loan approved.

Mortgage fraud can also be a federal crime, however the government may use other ways to prosecute mortgage crimes in federal court.

 They may use things like:

• Mail Fraud: Using the mail to send and receive documents that are fraudulent related to a mortgage
• Wire Fraud: Using the internet or the phone to send or receive information about a fraudulent mortgage transaction.
• Bank Fraud: Intentionally defrauding a financial institution in relation to a mortgage transaction that is fraudulent.

Depending on the circumstances of the case prosecutors may choose to bring either state or federal court.

In some cases, both may apply.

You can be charged for your specific charge in state court and charged with mail fraud in federal court.

Penalties for Mortgage Fraud in Nevada

If you are convicted of mortgage fraud in Nevada, the penalties can vary depending on the severity and nature of your actions. Nevada law has provisions for both criminal and civil penalties.

For first-time offenders, a conviction of mortgage fraud is classified as a category C felony. This includes a prison sentence of 1-10 years and/or a fine of up to $10,000.

For subsequent offenses, or someone who “engages in a pattern of mortgage lending fraud,” the penalties increase to a category B felony with a potential prison sentence of 3-20 years and/or fines up to $50,000.

In addition, civil penalties of $5,000 per violation can also be imposed by the Nevada Attorney General’s Office.

These penalties are meant to serve as a deterrent and protect consumers from fraudulent mortgage practices.

Can I Seal My Records?

If you are convicted of mortgage fraud in Nevada, it may be possible to have your records sealed after a certain period of time and if you meet certain criteria.

Sealing your records means that the public will not have access to information about your conviction. This can be beneficial when applying for jobs or housing as it allows you to present yourself without the stigma of a criminal record.

Under Nevada law, you must wait at least five years from the date of discharge to apply for sealing of records for either a category C or B felonies.

Additionally, you must have completed all terms of your sentence and demonstrate good behavior during that time.

What Are the Defenses Against Mortgage Fraud Charges?

According to NRS 205.372, mortgage fraud is an intent crime. This means there is no crime if you had no intent to defraud. Since this is the case, the most common defense is that you did not deliberately attempt to trick anyone. Depending on who is being charged with mortgage fraud will determine if the courts side with your intent defense.

The courts tend to be more understanding to the common person who has little or no knowledge of the mortgage industry. The courts are less understanding of people who work in the mortgage industry or companies since they should know the rules and laws.

Another defense is you had no knowledge of the fraud.

Believe it or not, many people have been defrauded of their home and money relating to their home without their knowledge. 

This is sort of like identity theft, where someone uses your personal information for financial gain without your knowledge or consent. 

Both of these scenarios involve being able to prove that you were not involved in the fraud.

Banks and lending institutions report suspicious activity to law enforcement when they suspect fraudulent transactions. Law enforcement then uses various ways to gather evidence of the fraud. Once law enforcement finds evidence of a crime they turn the evidence over to prosecutors. 

Being charged with mortgage fraud can lead to severe penalties including prison time. 

Always speak with an experienced legal representative if you have been charged with any form of mortgage fraud.

How Can a Defense Law Firm Help With a Mortgage Fraud Case?

Even though financial crimes are considered different from violent crimes they still involve a criminal charge and a penalty. 

Most people think of mortgage fraud as a white collar crime that really doesn’t have an intended victim. However, financial crimes like mortgage fraud affect everyone leading to increased prices and can leave people destitute.

In 2008, the failure of banks led to the loss of retirement funds for millions. Banks defaulted on bad loans, leaving many people with nothing.

So mortgage fraud is not a victimless crime. 

Being charged with mortgage fraud could lead a defendant to be imprisoned for many years depending on the circumstances.

If you have been charged with a financial crime you still need to consult with an experienced lawyer.

You need a specific strategy to defend the charges so you don’t end up in prison.

In some cases, the penalties for mortgage fraud are worse than some other criminal charges because there may be more than one victim. You need to hire a lawyer with a reputation for getting charges reduced or dismissed, who has been practicing law in Nevada for many years. 

The Defenders have been representing clients in Nevada for years and have a well-established reputation. 

We represent clients in all aspects of criminal defense and our record speaks for itself. 

Contact The Defenders today and schedule a case review.