Fraud is concealing or misrepresentation of facts to influence another person into taking damaging action. You commit the crime of real estate fraud when you engage in a dishonest act that results in unjustified financial or property gain during a real estate transaction. Real estate fraud can occur at any point of a real estate transaction, and the fraudulent conduct includes straw buyer schemes, predatory loans flipping property, and more.
Authorities are keen on enacting strict laws to protect innocent real estate clients from cunning lenders and agents. For this reason, anyone who faces criminal charges for real estate fraud risks facing severe legal penalties. Even when your case does not end in a conviction, allegations of real estate fraud could ruin your reputation and professional image.
If you or a loved one faces criminal charges for real estate fraud, it would be wise to enlist the services of an experienced criminal defense attorney. At Darwish Law, we will guide you through the process of building a defense against your charges to avoid a conviction. We serve clients seeking legal guidance to battle fraud charges in Santa Ana, CA.
Overview of Real Estate Fraud in California
Real estate fraud, commonly known as mortgage fraud, is a crime that occurs when someone commits a fraud crime involving the financing, sale, or purchase of real estate properties. Real estate fraud is a term used to cover a wide variety of illegal conduct in the middle of real estate transactions.
Most real estate transactions are public records. Therefore, anybody may be able to see the type of business deals you are conducting. An investigation for real estate fraud begins when the Department of Real Estate notices a red flag in your pending transactions. Sometimes, the DRE receives multiple complaints that you sell a property at inflated fees or unethical conditions.
To prove your guilt for any real estate fraud, the prosecution must prove the following elements of the crime:
- You knowingly and willfully deceived a real estate owner or lender through a pretense of other fraudulent means.
- You acted intending to coerce the alleged victim so that they can allow you access and control of their property.
- You knew that the information you provided to the victim was misleading or false.
- The victim handed over control or ownership=p of their property by relying on the false information you presented.
Types of Real Estate Fraud
Like other white-collar crimes, real estate fraud is a complicated scheme. Therefore, it is complicated to point out any specific conduct to fit the definition of this crime. The most common forms of Real Estate Fraud Include:
The crime of foreclosure fraud is addressed under Civil Code 2945.4, and it rises when someone is facing foreclosure for an inability to pay their mortgage. Since unsettled foreclosures are a public record, it is common for financially distressed homeowners to fall victim to foreclosure fraud. You are at risk of facing charges under this statute if you are a foreclosure consultant or a person who offers services to homeowners facing foreclosure. Some of the activities that could attract charges for foreclosure fraud include:
- Collect or charge Exorbitant rates for offering services.
- Collect or charge compensation for services you have not offered.
- Acquiring an interest in a homeowner's residence in foreclosures.
- Attempting or inducing a homeowner to enter a contract that does not comply with Sections 2945.3 and 2945.2 of the civil code.
- Taking power of attorney from a property owner.
- Charging interest or a fee above 10% for loans made to the homeowner by the foreclosure consultant.
Some of the categories of foreclosure fraud addressed under Civil Code Section 2945.4 are:
- Title transfer. This is a form of fraud that occurs when a foreclosure consultant persuades a property owner to sign over their house to them. This can be accomplished when you assure the owner that they can repurchase it later.
- Phantom help schemes. Promising a homeowner that you will help them avoid foreclosure if they pay you is illegal.
- Bait and switch. This form of foreclosure fraud is related to the title transfer. However, in bait and switch, the property owner may not know that they are signing away their property to another person. You may be guilty of bait and switch if you make a property owner sign a property transfer document by presenting blank documents or presenting documents with writings that are not clear.
Civil Code 2945.4 is a wobbler. The penalties for a misdemeanor foreclosure fraud conviction include misdemeanor probation, a jail sentence of up to one year, and $1,000 fines. On the other hand, a felony conviction under this statute is punishable by a minimum prison sentence of sixteen months, $10,000 in fines, and felony probation.
Filing Forged Deeds or Documents
Forgery or property documents involve altering a property deed or an attempt to present a fake deed as authentic. Filing of forged documents is a common form of real estate fraud and is addressed under California Penal Code 115. Under this statute, it is illegal to knowingly register or file a false document in a public office. When you face charges for real estate fraud after presenting false documents to aid unlawful property acquisition, the district attorney must prove the following elements to secure a conviction:
- You recorded, registered, or filed a document in public office.
- You knew that the document was forged.
- You acted with an intent to commit real estate fraud.
A violation of California PC 115 is a felony. A conviction for this crime is punishable by up to three years in prison and fines that do not exceed $10,000. Sometimes, the court may impose formal probation instead of prison time after a conviction under this statute. However, you may not be eligible for probation if you are a repeat offender or have a conviction for multiple counts of the offense.
In addition to the above penalties, you could face a penalty enhancement under the following circumstances:
- You are convicted for multiple felonies involving fraud or embezzlement in a single proceeding.
- You commit the crime against multiple victims.
- Your actions resulted in a loss of up to $100,000 for the victim.
Being a straight felony, filing a forged document is treated as a crime of moral turpitude. For this reason, a conviction for the offense could result in deportation or be rendered inadmissible.
Illegal Property Flipping
Property flipping is a legal practice that involves buying property, refurbishing it, and selling it at a profit. However, such activity becomes illegal when you inflate the property's value by appraising it fraudulently. A fraudulent appraisal can occur when a bank uses a property as collateral to offer more money than the property's value. Several individuals may be caught up in an illegal property flipping scheme, including:
- Property buyers.
- Real estate agents and brokers.
- Straw buyers.
- Real estate appraisers.
- Anyone willing to draft fake documents and present them as legitimate in a real estate transaction.
Illegal property flipping is prohibited under a variety of laws which the prosecution may evaluate to determine where your offense lies. Some of the most common crimes charged in close connection with illegal property flipping include mail fraud, a felony, and wire fraud. A felony conviction for a crime involving property flipping attracts a prison sentence of up to three years and court fines not exceeding $10,000.
The issue of predatory lending has gained national attention in the past years. Unlike popular belief, predatory lending involves both large institutions and subprime lenders who are out to exploit vulnerable homeowners. Predatory lending involves:
- Taking advantage of the borrower's lack of knowledge of the complicated transactions to exploit them.
- Attaching unfair terms to the loan.
- Outright deception.
Predatory lending becomes illegal when a lender uses loan transactions to extract money from a borrower without regard to their ability to pay the loan back. There are two common features in most predatory lending situations:
Targeting Marketing based on Discriminatory Practices
Lenders have a wide variety of public information at their disposal. Therefore, they can identify and prey on uninformed and uneducated individuals who may not scrutinize the paperwork before signing. Households with limited income and those with the elderly are at a greater risk of predatory lending. Some lenders move door to door or use telephone communications to solicit potential clients. Such activities become illegal when the lender engages in fraudulent behavior to make undeserving profits.
1) Abusive Loan Terms
Excessive rates and fees characterize predatory loans with abusive loan terms. A lender who fills the loans with unnecessary terms may be charged and convicted of real estate fraud. Some of the most common abusive terms include:
- A large repayment penalty.
- Loan approvals ignore the borrower's ability to pay back.
- Deceptive promises involving low rates.
- Unnecessary balloon payments.
2) Home Improvement Scams
Home improvement contractors could be caught up in predatory lending schemes when they fraudulently convince homeowners to refinance their homes to pay for improvements. In such situations, the lender steers the owner into a predatory scheme in exchange for a referral fee. Predatory lending can be charged under both federal and state laws. A conviction for federal predatory lending will cause you to spend substantial time in federal prison.
When the crime of predatory lending is handled under state laws, it will be charged and prosecuted under various statutes, including grab theft, conspiracy to commit grand theft, and forgery laws.
3) Rent Skimming
Rent skimming is one of the most common forms of real estate fraud, and it involves:
- Collecting income from rental property without paying your obligatory debt. This means that you use the proceeds from rent during the first year without applying an equivalent amount to the mortgage.
- Renting a property that belongs to another person and collecting the rent.
Engaging in one act or remit skimming will attract civil penalties. However, engaging in multiple acts may attract criminal penalties. If you lose your civil lawsuit after your first act of rent skimming, you will be required to reimburse the victim for all their financial losses and pay their attorney fees.
When the situation is handled in criminal court, rent skimming can be charged as a felony or a misdemeanor. The prosecution will determine the nature of your charges by considering your criminal history and the circumstances around the offense. A felony conviction for rent skimming is punishable by a maximum prison sentence of three years and a $10,000 fine. You will spend a year in county jail if you are coveted for a misdemeanor.
You can be charged with real estate fraud under grand theft law if you defraud someone of property worth more than $950. Grand theft is charged under California PC 487 and is divided into grand theft by larceny, pretense, trick, or embezzlement. Real estate fraud is addressed under grand theft by pretense and has the following elements:
- You intentionally deceived someone by bypassing incorrect information.
- You intended to persuade the victim to let you take possession of their property.
- The person relied on the false information to let you take possession of their property.
Real estate fraud commissioned through grand theft is a California wobbler. The prosecution could bring misdemeanor charges that attract a one-year jail sentence after a conviction based on your case's criminal history and other circumstances. When charged as a felony, the offense is punishable by a prison sentence ranging from sixteen months to three years.
Straw Buyer Schemes
A straw buyer is an individual who buys property on behalf of another person. This act becomes a crime when it is done to commit fraud. A straw mortgage is a situation where the straw buyer enters a real estate transaction for another person. Most people who use straw buyers will look for someone with a good credit score to increase the chances of receiving a substantial amount.
Failure to pay off a loan taken through a straw could result in home foreclosure and loss of a good credit score status. In California, fraudulent straw buyer schemes could attract criminal charges under grand theft, forgery, mail fraud, and wire fraud. If you face real estate fraud charges, you must navigate the case with guidance from a skilled lawyer.
Defenses to Real Estate Fraud Charges
A conviction for real estate fraud has the potential to ruin your life. Therefore, your journey to fight the charges should begin as soon as you face an arrest for the offense. Mortgage fraud cases often require a thorough examination of the evidence about the real estate fraud laws. Therefore, fighting the charges on your own may be very challenging. When you hire an attorney for your case, they can help you build a defense around the following strategies:
Lack of a Fraudulent Intent
One of the key elements that must be clear during real estate fraud prosecution is your intent to defraud the alleged victim. The court cannot convince you without fraudulent intent regardless of your actions. You can argue that your actions were triggered by false misrepresentation of a fact, or you acted with good intentions. For this reason, the incident will be viewed as a mistake and not a crime.
Consent from the Property Owner
In most cases, accusations of fraudulent real estate transactions are connected to your dealings with another person's property. Sometimes a person may give you consent to act on that property but later forget it or withdraw their consent. If you prove that the victim consented to you representing them, the property or withdrawal of the consent was not correctly communicated, you could avoid a conviction under this statute.
Real estate transactions are complicated, and they involve multiple people. With so many players in this business, fraud charges based on false accusations are not uncommon. A person may falsely accuse you of such a crime out of anger, revenge, or to cover up their illegal activities. Sometimes, you may be a victim of identity theft where a person signs documents in your name.
Find a Criminal Defense Lawyer Near Me
Real estate fraud encompasses various conduct prohibited by the law and can occur during the financial process, appraisal, closing, or a real estate transaction. Any person involved in the real estate transactions could be charged with this crime for illegal activities like lying during applications and filing false documents.
Real estate fraud could be charged under different statutes depending on the fraudulent activity. Some of the most common forms of the offense are charged under grand theft, filing of false documents, rent skimming, and foreclosure Fraud. A charge of real estate fraud can be devastating, especially when there is a possibility of jail time and hefty fines.
If you are battling real estate fraud charges, you will require the services of a passionate and dedicated defense attorney. At Darwish Law, we understand the intricate details of fraud law and have extensive experience defending individuals facing insurance fraud charges. You will need our expertise to provide legal guidance and representation to fight your criminal charges in Santa Ana, CA. Call us today at 714-887-4810 to discuss the details of your case.