Legal Question in Real Estate Law in Wisconsin

Bankruptcy Limiting Mortgage to Home Value, Credit Application Fraud

Everyone should consult with an experienced bankruptcy attorney any time they experience financial problems in order to learn what options might be available. The current administration in Washington DC will probably soon pass legislation allowing a bankruptcy judge to reduce the amount owed on a home relative to that home's current value following our recent global real estate crash. Such a new rule might greatly assist you in reducing your mortgage(s). Responding to your specific question, any time that a person makes a false statement under oath, that person is guilty of perjury, false swearing, or other related felonies, and these rules are fully applicable in loan applications, regardless of why one may have made the false statements. However, if the new second mortgage was intended to pay off the old mortgage, the applicant may have been correct in leaving the amount which was to be refinanced off of the loan application, since the old debt would literally disappear after closing and would therefore no longer be material to your creditworthiness. If a technically false statement were immaterial in this fashion, the borrower may not be guilty of credit fraud or perjury for such a statement. Generally speaking, when false statements are made in order to induce lending, they also constitute credit fraud, which is also a felony. If credit fraud is sufficiently blatant and causes a large loss to the lender, criminal prosecutions for credit fraud can occur. However, such prosecutions are rare unless the fraud is brought to the attention of law enforcement via someone filing a complaint(i.e., the bank, its regulators, or successor owners of the loan). If you intentionally lied to get a loan, you are therefore vulnerable to such criminal charges. In criminal prosecutions, the complaining party is the government rather than the bank; hence a bank's possible culpability for predatory lending would not be a defense, although such a claim might be useful to you in defense of a loan foreclosure. However, if the bank or its agents were accomplices to the fraud by telling the borrower exactly how to lie in order to qualify for the loan, the borrower may have a legal defense in a criminal prosecution. This defense would be that the bank did not reasonably rely upon the misrepresentation in making the loan; since the bank was actually an accomplice to the lie. This type of scenario is extremely common among my clients; the bank and/or its mortgage broker has often solicited any false statements which were made.My comments in this online forum are not intended as legal advice for anyone asking a question here unless that person subsequently retains me. Instead, all participants in this forum must obtain and consult with their own attorney prior to acting upon any comments published here.

Re: Credit Application Fraud

Often a loan originator fills out the loan application with the borrower and then later, at closing, has the borrower re-affirm the application. Unfortunately, borrowers often trust the loan officer rather than actually reading the documents.

Omitting a substantial debt in a loan application certainly may constitute a fraud. A borrower who knowingly mislead the lender risks liability, both criminal and civil, for fraud. However, the lender and its agent(s) also can be liable for fraud. Depending upon the circumstances, and what the borrower is able to document, the borrower may have leverage to obtain equitable relief.

This is not intended to and does not provide legal advice. Rather, we only offer general feedback which may not be applicable depending upon the totality of the facts. Please contact us directly if you have specific questions or concerns. http://www.Grahamlaw.biz