Real Estate - Appraisal Fraud

Expert Witness - Mortgage Fraud

Tenants-In-Common Fraud

Mortgage Loan Fraud Attorneys

The attorneys with Michael T. Chulak & Associates represent both plaintiffs and defendants in mortgage loan fraud and other fraud claims throughout California. While fraud is a tort and civil cause of action, when the conduct is intentional, there may be criminal prosecution. When representing defendants, we provide both criminal defense and civil law defense representation. Please visit: Attorney - Client Privilege.

Fraud claims often arise in connection with the following:

Fraudulent mortgage loan applications - documentation
   
Failure to disclose in real estate sales
   
Sales of securities (stock, trust deeds, limited partnership interests)
   
Land sales and loans
   
Purchase of a business
   
Sales of tenant-in-common (TIC) interests (securities)
Fraudulent real estate appraisals
Forged documents
   
Wrongful - fraudulent foreclosures
   
Bankruptcy filings
   
Franchise sales
   
Predatory mortgage lending and servicing
   
Developer concealed defects (new homes)
   
Syndications - LLP, LLC disputes
   
Fraudulent asset transfers
   
Financial elder abuse
   
Mortgage Loan Modification Scams
   
Rent Skimming
   
Accredited Investor Disputes
   

Proving Fraud

In order to prove mortgage loan fraud or any other type of fraud, the plaintiff must prove all of the following elements by clear and convincing evidence:

1. That defendant represented to the plaintiff that an important (material) fact was true;
   
2. That the defendant's representation was false;
   
3. That the defendant knew the representation was false when he or she made the representation, or that he or she made the representation recklessly and without regard for the truth;
   
4. That the defendant intended that the plaintiff rely on the representation;
   
5. That the plaintiff reasonably relied on the defendant's representation;
   
6. That the plaintiff was harmed; and
   
7. That the plaintiff's reliance on the defendant's representation was a substantial factor in causing his or her harm.
   

Judgments for fraud can result in punitive damages over and above any compensatory damages. Punitive damages or exemplary damages are awarded to punish a losing party's malicious or intentional misconduct. Punitive damages can be and usually are substantial.

Negligent Misrepresentation

When a plaintiff is not able to prove fraud, he or she can often prove negligent misrepresentation. The elements for negligent misrepresentation are as follows:

1. That the defendant represented to the plaintiff that an important (material) fact was true;
   
2. That the defendant's representation was false;
   
3. That the defendant had no reasonable grounds for believing the representation was true when he or she made it;
   
4. That the defendant intended that the plaintiff rely on the representation;
   
5. That the plaintiff reasonably relied on the defendant's representation;
   
6. That the plaintiff was harmed; and
   
7. That the plaintiff's reliance on the defendant's representation was a substantial factor in causing his or her harm.
   

A judgment for negligent representation will be for compensatory damages, but will not include punitive or exemplary damages.


Mortgage Loan Fraud 

Mortgage loan fraud involves an action where the intent is to materially misrepresent or omit information on a real estate loan application in order to obtain a loan that would not otherwise be available to the borrower. Mortgage loan fraud is a violation of federal law that can result in imprisonment for ten to thirty years. It is investigated by the FBI. Thus it is a serious crime.

 

Short Sale Fraud 

Short sale fraud is becoming one of the most common frauds in the United States. It is a serious matter because it almost always results in bank fraud which is a federal crime punishable by a long prison sentence. It is usually committed by property owners who are intending to reacquire the property after a short sale results in a lower mortgage loan. Real estate brokers, real estate sales agents, and real estate appraisers are often involved with the property owner in committing short sale fraud. To get the banks or real estate lenders to approve low purchase offers, appraisals and broker price opinions are manipulated. In addition to the civil and criminal liability problems, short sale fraud causes harm to mortgage lenders and lowers property values of surrounding properties.

 

Mortgage Billing Fraud 

Mortgage billing fraud takes place when someone who makes monthly payments on a real estate loan receives a fraudulent letter advising them that their loan has been sold and that all future payments are to be made to a new mortgage lender, usually at a temporary address. Perpetrators of mortgage billing fraud typically collect only one or two payments before the fraud is detected, but usually thousands of people are targeted victims. Often an employee of a mortgage lender is involved in providing the list of borrowers.

 

Mortgage Loan Fraud Examples

Appraisal Fraud: Takes place when the value of a property is intentionally overstated or understated. When overstated, more money can be borrowed against the property than what would be justified by a proper real estate appraisal. When understated, in order to obtain a lower price on a foreclosed property, or to induce a mortgage lender to decrease the amount owed on a real estate loan in a loan modification, appraisal fraud has taken place.

Employment Fraud: Takes place when a borrower claims self-employment in a non-existent business or claims a higher level position in an existing business in which the applicant is employed, in order to obtain a mortgage loan.

Income Fraud: Takes place when a borrower overstates his or her income on a mortgage loan application in order to qualify for a loan. This commonly occurs with "stated income mortgage loans" where the lender does not verify the income claimed on the loan application.

Occupancy Fraud: Takes place when the borrower intends to purchase an investment (rental) property, but represents on the loan application, that he or she intends to occupy the property as a primary residence or as a second home. Lenders charge higher interest rates and generally lend a smaller percentage of the fair market value to borrowers who intend to rent their property because default rates are higher with such properties. In such cases, the borrower has committed mortgage loan fraud because he or she has materially misrepresented the risk to the mortgage lender in order to obtain better loan terms.

Cash Back Arrangements: Take place where the price of the property is fraudulently increased in escrow with cash being returned to the buyer-borrower outside of escrow, in order to increase the loan amount and loan to value ratio. The result is that the mortgage lender loans more money than what it would normally lend making an unsafe loan. This arrangement would require a fraudulent appraisal, or at the minimum, an appraisal that was completed negligently.

Identity Theft Loans: Take place when an individual assumes the identity of a property owner and then uses that identity to borrow money using the property as security.

Shotgunning: Takes place when several mortgage loans are obtained simultaneously for an amount far in excess of the value of the property and without the knowledge of the other real estate lenders. Every lender believes it is obtaining a first priority position but only one lender obtains priority over others who often lose their investment.

Use of Multiple "Holding Companies": Takes place when the owner of a property "sells" the property from one controlled entity to another multiple times in order to create documentation and the appearance of sales (at inflated prices). This is done in order to justify a high appraisal that is then used to obtain a high loan amount.




Please visit Piercing the Corporate Veil, Real Estate Recovery Fund and Glossary of Real Estate Loan Terms.

Please contact us with questions about mortgage loan fraud, appraisal fraud, real estate fraud, or any other legal matter.


 

Litigation Glossary

 

Expert Witnesses and Consultants Needed

In connection with our extensive litigation practice, Michael T. Chulak & Associates regularly utilizes the services of expert witnesses and consultants. If you believe you have the knowledge, experience and overall ability to provide these services, we invite you to complete an application and return it with your current resume. Upon receipt, we will enter the information into our database for use by our litigation attorneys and support staff. Please view our websites to become familiar with our areas of practice.




Areas Served:

Los Angeles County:

Acton, Agoura, Agoura Hills, Agua Dulce, Alhambra, Altadena, Arcadia, Arleta, Artesia, Avalon, Azusa, Baldwin Hills, Baldwin Park, Bassett, Bell, Bell Canyon, Bell Gardens, Bellflower, Beverly Hills, Bouquet Canyon, Box Canyon, Burbank, Calabasas, Calabasas Hills, Canoga Park, Canyon Country, Carson, Castaic, Century City, Cerritos, Chatsworth, Claremont, Commerce, Compton, Covina, Cudahy, Crystalaire, Culver City, Del Sur, Diamond Bar, Downey, Duarte, East Los Angeles, East Rancho Dominguez, El Monte, El Segundo, Encino, Firestone Park, Flintridge, Gardena, Glassell, Glassell Park, Glendale, Glendora, Granada Hills, Hacienda Heights, Hawaiian Gardens, Hansen Dam, Hawthorne, Hermosa Beach, Hidden Hills, Highland Park, Hollywood, Huntington Park, Industry, Inglewood, Irwindale, La Canada Flintridge, La Crescenta- Montrose, La Habra Heights, La Mirada, La Puente, La Verne, La Canada, Lake Hughes, Lake Los Angeles, Lake View Terrace, Lakewood, Lancaster, Lawndale, Leimert Park, Lennox, Leona Valley, Lincoln Heights, Littlerock, Lomita, Long Beach, Los Angeles, Lynwood, Malibu, Manhattan Beach, Marina Del Rey, Maywood, Mission Hills, Monrovia, Monte Nido, Montebello, Monterey Park, Mount Baldy, Mount Wilson, Newhall, North El Monte, North Hills, North Hollywood, Northridge, Norwalk, Pacoima, Palisades, Palmdale, Paramount, Pearblossom, Pico Rivera, Pomona, Quartz Hill, Rancho Dominguez, Rancho Palos Verdes, Rancho Park, Redondo Beach, Reseda, Ritter Ranch, Rolling Hills, Rolling Hills Estates, Rosemead, San Dimas, San Fernando, San Gabriel, San Marino, San Pedro, Santa Clarita, Santa Fe Springs, Santa Monica, Saratoga Hills, Saugus, Sherman Oaks, Sierra Madre, Signal Hill, South El Monte, South Gate, South Pasadena, Stevenson Ranch, Studio City, Sun Valley, Sun Village, Tarzana, Temple City, Toluca Lake, Topanga, Torrance, Tujunga, Universal City, Val Verde, Valencia, Valley Village, Van Nuys, Venice, Vernon, Walnut, Walnut Park, West Covina, West Hills, West Hollywood, West Los Angeles, West Toluca Lake, Westchester, Whittier, Wilmington, Windsor Hills, Winnetka, Woodland Hills.

Ventura County:

Camarillo, Channel Islands, Faria Beach, Fillmore, Moorpark, Newbury Park, Oak Park, Oak View, Ojai, Oxnard, Port Hueneme, Santa Paula, Saticoy, Somis, Simi Valley, Thousand Oaks, Ventura (San Buenaventura), Westlake Village.

Orange County:

Aliso Viejo, Anaheim, Balboa Island, Brea, Buena Park, Corona Island, Costa Mesa, Cypress, Dana Point, Foothill Ranch, Fountain Valley, Fullerton, Garden Grove, Huntington Beach, Irvine, La Habra, La Palma, Ladera Ranch, Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Forrest, Los Alamitos, Mission Viejo, Newport Beach, Newport Coast, Orange, Placentia, Rossmoor, San Clemente, San Juan Capistrano, Santa Ana, Santa Ana Heights, Seal Beach, Stanton, Tustin, Tustin Foothills, Villa Park, Westminster, Yorba Linda.

San Bernardino County:

Adelanto, Apple Valley, Barstow, Big Bear, Big Bear City, Chino, Chino Hills, Colton, Crestline, Fontana, Grand Terrace, Hesperia, Highland, Joshua Tree, Lake Arrowhead, Landers, Loma Linda, Montclair, Morongo Valley, Needles, Ontario, Rancho Cucamonga, Redlands, Rialto, Running Springs, San Bernardino, Twentynine Palms, Upland, Victorville, Yucaipa, Yucca Valley.

Riverside County:

Anza, Banning, Beaumont, Bermuda Dunes, Blythe, Cabazon, Calimesa, Canyon Lake, Cathedral City, Cherry Valley, Coachella, Corona, Desert Hot Springs, East Blythe, East Hemet, El Cerrito, Glen Avon, Hemet, Highgrove, Home Gardens, Homeland, Idyllwild-Pine Cove, Indian Wells, Indio, La Quinta, Lake Elsinore, Lakeland Village, Lakeview, Mecca, Mira Loma, Moreno Valley, Murrieta, Murrieta Hot Springs, Norco, Nuevo, Palm Desert, Palm Springs, Pedley, Perris, Quail Valley, Rancho Mirage, Riverside, Rubidoux, San Jacinto, Sun City, Sunnyslope, Temecula, Thousand Palms, Valle Vista, Wildomar, Winchester, Woodcrest.

Santa Barbara County:

Ballard, Buellton, Carpinteria, Gaviota, Goleta, Guadalupe, Hollister Ranch, Hope Ranch, Isla Vista, Lompoc, Los Alamos, Los Olivos, Mission Canyon, Mission Hills, Montecito, Orcutt, Santa Barbara, Santa Maria, Santa Ynez, Solvang, Summerland, Toro Canyon.

Kern County:

Arvin, Bakersfield, Bear Valley Springs, Bodfish, Boron, Buttonwillow, Caliente, California City, China Lake Acres, Delano, Ford City, Frazier Park, Golden Hills, Kernville, Lake Isabella, Lamont, Lebec, Lost Hills, Maricopa, McFarland, Mojave, North Edwards, Oildale, Pine Mountain Club, Ridgecrest, Rosamond, Rosedale, Shafter, South Taft, Stallion Springs, Taft, Taft Heights, Tehachapi, Wasco, Weedpatch, Weldon, Wofford Heights.

San Luis Obispo County:

Arroyo Grande, Atascadero, Avila Beach, Baywood-Los Osos, Cambria, Cayucos, Grover Beach, Lake Nacimiento, Los Osos, Morro Bay, Nipomo, Oceano, Paso Robles, Pismo Beach, San Luis Obispo, San Miguel, San Simeon, Santa Margarita, Templeton.

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