One Year in Jail and a $10,000.00 fine?

Mortgage and Lending with Southern California Mortgage Professional NMLS #254430

One Year in Jail and a $10,000.00 fine?

You heard it!  That is the price for mortgage fraud.

I don't know about you, but my red hair clashes with orange!



This is serious folks!  How many of you have had clients who were CLEARLY buying an investment property, but obtained financing as an owner occupied home?  Ok none of us want to admit it, but let's be honest.  This happened ramp-idly in the past, but NO MORE!  If caught, it comes with a mandatory $10,000.00 fine and one year in jail.

You can not as the realtor say to the judge, "But I didn't know!"  Because the judge will say "It's your job to know". 



And it is.  It's our job as mortgage professionals and realtors to ask the appropriate questions, to structure the deals properly. It's not only our job to protect the banks against the risk of foreclosure, but it protects all of us and our economy.  If the last few years doesn't convince you of that, I don't know what else can.  Oh yeah...3 square meals.

I just today received a phone call from an investor who said "off the record, my partner has never owned a home".  I was wondering if we could put it in his name."  I said, Of course you can, but "Off the record, it comes with a $10,000 fine and 1 year in jail, so I'm not willing to be a party to that."  He immediately said, "never mind I have the 20% down".  I thought to myself....." well that was easy"  



There are many different ways to involve yourself in mortgage fraud and just because you dance around the topic and don't put anything in writing, doesn't mean you aren't privy to what is going on.  Let's just say it like it is.....


 And if you don't think they are looking for and prosecuting all parties, read the mortgage fraud blog and see up to date instances.

So a word to the wise.  Those of us that have hung in there and protected our careers in this industry.

  Let's continue to "do the right thing".


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  1. Lewis Poretz 07/14/2010 07:24 AM
Mortgage / Finance
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Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

It amazes me that people will risk so much just to save some money. It is just not worth it and is certainly not worth it for us to be a party to any of it.


Jul 14, 2010 12:55 AM #15
Deborah "Dee Dee" Garvin
C2 Financial - San Diego, CA
C2 Financial

Colleen, nicely done,  Like Carla, my red hair and I don't clash with anything...but I prefer pink!  LOL!

Jul 14, 2010 01:35 AM #16
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Colleen, $10,000 fine and one year in jail or 20% down. That was a no brainer. We could very well be the investors cell mate, if we are a party to this type of fraud. Thanks.

Jul 14, 2010 02:00 AM #17
Bill Travis
Captain Bill Realty, LLC - Gilbert, AZ

I respect Sheriff Joe here in AZ for being tough in his job, and I wouldn't want to be in his tent city wearing pink underwear, so I'll remember to not commit mortgage fraud, or any other fraud.

Jul 14, 2010 02:12 AM #18
Irene Kennedy Realtor® in Northwestern NJ
Weichert - Lopatcong, NJ

Clash or not, I'd prefer not to go to the slammer for any reason! I've closed the door on fraud - even when it has cost me a deal.

Jul 14, 2010 02:18 AM #19
Joe Harvey
Lake Worth Real Estate - Lake Worth, FL

I wish they would go back over the files from the last 5 years and throw all the mortgage brokers in jail who did this as I am a broker myself and got asked over 25 times to do a purchase as owner occupied when it wasnt going to be and I refused..and the guy up the street did ALL of these for them...maybe karma will catch up and he will get the 25 years for the 25 fraudulent files he did....who do I call lol

Jul 14, 2010 02:20 AM #20
Patrick McClenahen
RE/MAX Realty Professionals, Inc. - Harrisburg, PA
The Real Estate Guy

Great reminder that we can be held responsible for our actions and our clients are not always what they seem to be. 

Jul 14, 2010 02:56 AM #21
Laurie Gibson
Windermere Access Realty - Caldwell, ID
SFR, Canyon County Real Estate

Great post!  It's always been strange to me, the thinking,  " if others are doing, it must be okay for me".  That mentality of, following the mob, kills you every time.

Jul 14, 2010 03:52 AM #22
Roy Paeth
Keller Williams Inspire - Geneva, IL
Just a regular guy helping real people!

Well put. Better to lose a deal than to spend a year wearing the orange jumpsuit even though orange is my favorite color.

Jul 14, 2010 04:26 AM #23
Chris Alston
Chris Alston (Keller Williams Realty, Silicon Valley, California) - Campbell, CA
Silicon Valley, California

It makes you wonder why there are so many out there that still think it is okay to...  you know...  break the law?  Just a small thing, right?  lol.

Jul 14, 2010 04:40 AM #24
Speed Equity® Mortgage Acceleration System
Speed Equity® - Olympia, WA
We help your clients Own Their Homes Years Sooner

Great post Colleen. 

Like you said, ignorance is NO EXCUSE because as professionals we are paid to know.

Jul 14, 2010 05:03 AM #25
Rick Phillips
Frankly Realty - Old Town - Alexandria, VA
I care about you and your transaction.

They typically waive the one-year sentence in order to get you to plead guilty and pay the fine.  $10,000 looks pretty sweet compared to a year in jail :-)

Jul 14, 2010 05:36 AM #26
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Colleen - AMEN!!!  I can smell fraud in a heartbeat and I too make it very clear that I don't work that way.  It's the easiest way to get rid of LOSERS!  On another note, my red hair doesn't look good in orange either.  LOL

Jul 14, 2010 05:53 AM #27
Colleen Craig
Southern California Mortgage Professional - Santa Clarita, CA
The Mortgage Ninja

John - that's part of the problem, they are over regulating the industry instead of enforcing what is already in effect.

Scott - I believe that the 10,000 fine and 1 year in jail is the MINIUMUM penalty and it depends on each individual offenses what people will get hit with.! 

Joe - I totally agree with you!  The biggest lender in my town was known to just open his checkbook, pay off buyers credit card debts and put a third lien on the property after closing - and then refinance them a few months later to pay himself off!  And the realtors all thought he was the BOMB! - I would love to see some of them get caught!


Jul 14, 2010 06:16 AM #28
Malik Crichlow
GoodBuy Homes NJ Essex & Union County Real Estate specialist - Maplewood, NJ
Maplewood,SouthOrange,Union Real estate

Some many people do it on a regular basis its very hard to police, but buyer beware if you get caught it is not a pretty event...GREAT POST!!!

Jul 14, 2010 06:17 AM #29
Lewis Poretz
Apex Home Loans - Annapolis, MD
Business Development Manager

How did those agents in Florida qualify for all those loans?

Very simple... They supplied tax returns or they stated their income...  I'm just saying...

Jul 14, 2010 07:21 AM #30
Lesley Wagstaff
Re/Max Results Realty in Vancouver, BC - Coquitlam, BC
For Real Estate and Mortgages

Didn't our parents always teach us "honesty is the best policy?"  I guess that was anpther thing they were right about!!

Jul 14, 2010 09:25 AM #31
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Colleen....thank you for a yummy post

The lies that you can get away with scare me the most. they should scare all of us the most. We learn as we travel through life that we got away with was all there, all clear and we navigated through it.....HOW we proceeded should not haunt us, but compliment us........

Jul 14, 2010 09:56 AM #32
Jewel Swinton
Wilkinson & Associates, ERA Greenville - Greenville, SC

I'm way too cute to go down for anybody, so I will pass on the

Jul 14, 2010 02:09 PM #33
Bill Burchard
3B Realty: 951-347-3818, CA - Murrieta, CA
Broker, Realtor, Representing Buyers and Sellers

A nice reminder, Colleen. And thanks for the tip on the mortgage fraud blog.

Jul 14, 2010 05:31 PM #34
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Colleen Craig

The Mortgage Ninja
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