Easily discovered Mortgage/Real Estate Fraud by IRS

Real Estate/Mortgage Fraud: Facts

Every part of the mortgage lending process presents another window of opportunity for people in our industry who, by the very nature of their job description, are exposed to unscrupulous loan originators, builders, real estate agents, borrowers, processors, underwriters, appraisers, lender account reps, and title closers. Each one of these positions or areas, needed to obtain a mortgage, leaves an opportunity for mortgage fraud.

Federal investigators have identified an increase in frauds and schemes in the real estate finance business. These schemes victimize individuals and businesses, including low-income families lured into home loans they cannot afford, legitimate lenders saddled with over-inflated mortgages, and honest real estate investors fleeced out of their investment dollars.

Special agents with IRS Criminal Investigation are uniquely equipped to investigate these types of mortgage fraud and illegal real estate finance crimes because they are skilled financial investigators whose mission is to ‘follow the money.

Some of the common real estate fraud schemes include:

• Property Flipping — a buyer pays a low price for property, and then resells it quickly for a much higher price. While this may be legal, providing false statements to the lender of income and the ability to repay the loan.

• Two Sets of Settlement Statements — one settlement statement is prepared and provided to the seller accurately reflecting the true selling price of the property. A second fraudulent statement is given to the lender showing a highly inflated purported selling price. The lender provides a loan in excess of the property value, and after the loans are settled, the proceeds are divided among the conspirators.

• Fraudulent Qualifications — Real estate agents/loan officers assist buyers who would not otherwise qualify by fabricating their employment history or credit record.

The income earned from these types of real estate fraud schemes is often laundered to hide the money from the government. Money laundering is simply a process of trying to make illegally earned income appear to be legitimately earned. IRS Criminal Investigation follows the money and collects evidence to prove applicable tax and/or money laundering violations. Once they have obtained the evidence, IRS agents forward their investigation to the Department of Justice for criminal prosecution.

If a criminal investigation is not warranted, the IRS can also take civil action. Each year the IRS audits thousands of tax returns involving individuals and entities associated with the real-estate business. Complex financial investigations may take several years to complete. For example, the data shown for sentenced investigations within a given fiscal year may represent investigations actually initiated in a previous fiscal year.

Why chance it?  The odds are stacked against the fraudster. This blog only scratched the surface of the resources dedicated and bugets allowcated to go after mortgage fraud.  It is not worth it regardless of how tempting it may appear.  You will get caught.