Ask a Mortgage Fraud: What Is the Maximum Penalty of Mortgage Fraud?


Whether your mortgage fraud case is being tried at the state or federal level, you will need to mount a strong legal defense to reduce the strict penalties associated with these cases. A mortgage fraud attorney can defend your rights. 

Ask a Mortgage Fraud Attorney: What Is the Maximum Penalty for Mortgage Fraud?

The current state and federal penalties for mortgage fraud are fierce. If you are convicted of mortgage fraud, you may be facing a maximum of 30 years in federal jail and fines of up to $1 million. The specific details of your case and the amount of loss associated with the alleged fraud scheme will have a direct impact on these penalties.

The consequences of mortgage fraud are particularly severe given the current housing crisis in America. After the 2008 real estate crash, federal and state laws have placed more importance on regulating home loans to improve lending practices and make it more difficult to commit mortgage fraud. You can learn more here about how a lawyer can help you if you have been accused of mortgage fraud.

Is Mortgage Fraud a Specific Charge?

Technically, mortgage fraud is not a specific federal charge. However, mortgage fraud cases can include charges such as wire fraud, bank fraud, mail fraud, conspiracy, money laundering, and much more. If you are accused of mortgage fraud, you may be facing several types of fraud charges with different maximum sentences and penalties.

In Texas, under ​Section 32.32 of the Texas Penal Code, ​intentionally making a ​misleading or false written statement to obtain a loan, including a mortgage loan, will result in charges and penalties. The degree of the punishment increases relative to the amount of credit that has been obtained through fraudulent activity. ​

What Are Different Types of Mortgage Fraud?

In general, mortgage fraud can be identified when there is evidence of significant inconsistencies in the paperwork associated with a property. Evidence can include mismatched home titles, home values, and bank loans. Fraud for profit is often prosecuted on the federal level, particularly if there seems to be a trail of repeated fraudulent acts. The most common types of mortgage fraud include:

Straw Buying

A straw buyer is someone who applies for a mortgage or purchases a property on behalf of another person, usually for the purpose of colluding in another scheme, such as flipping or equity skimming. Since a person with good credit is more likely to get a mortgage loan, a straw buyer can be used to obtain a property with false identification or false financial information. 

Equity Skimming

Equity skimming involves purchasing a property with the help of a straw buyer. Once the straw buyer has obtained the property, the buyer passes the property deed to the investor and surrenders all rights to the property. From there, the investor can rent out the property without making mortgage payments until the property faces foreclosure. The investor can profit from the rental income but will not be on the hook for foreclosure consequences.

House Flipping Schemes

House flipping schemes typically involve multiple people, such as the buyer and a home appraiser who agrees to inflate the value of the property. With this scheme, a property is purchased below market value and then put back on the market at a higher price, so the flipper can profit from the suddenly inflated value of the home. 

Inflated Appraisals

House flippers aren’t the only ones who can use a corrupt appraiser to turn a profit on a property. Inflated appraisals are false representations of the value of a given property. Inflated appraisals typically help appraisers gain a larger commission on the sale of a property, which is why appraisers may be motivated to undervalue a property to make it easier for an investor to purchase it. 


Shotgunning schemes occur when a mortgage broker or real estate professional secures several loans for one property. These loans are offered by different banks and credit unions without the lender’s knowledge. After the loans are received and the funds are collected without any intention to repay each loan, the lenders will have to determine who is owed collateral for the property. 

Who Can Be Accused of Mortgage Fraud?

While homebuyers who fudge the numbers on mortgage applications to get a loan can be accused of mortgage fraud, it’s far more common for people within the real estate and financial sectors to be charged with fraud allegations. You may be accused of defrauding the lending system if you are a home appraiser, real estate agent, mortgage broker, or real estate attorney. 

Is There a Statute of Limitations?

The statute of limitations for federal mortgage fraud cases is 10 years. This 10-year limitation was established in 2009 with the Fraud Enforcement and Recovery Act as part of the response to the 2008 housing crash. 

Mortgage fraud is a serious allegation that can result in severe penalties and consequences, including up to 30 years in jail. If you have been accused of mortgage fraud, you should hire a mortgage fraud attorney as soon as possible, so you can create a legal defense strategy. You may need to defend yourself from both state and federal fraud charges.