South Carolina Criminal Lawyer Blog

The South Carolina legislature is in the process of passing new legislation that would require a state license for mortgage lenders. South Carolina and Indiana are the only two states that do not require a license for mortgage lenders. This new law will also provide for criminal penalties. The FBI has previously ranked South Carolina as one of the top ten states for mortgage fraud. Although this new law, The Mortgage Lending Act, will provide state law enforcement with a new tool, there are still federal mortgage laws that can affect mortgage brokers and mortgage lenders for their actions in the past several years. Mortgage fraud will be a target for the United States Attorney in the coming months. The more foreclosures and mortgage defaults that occur, the more the government will be investigating the lending practices of mortgage companies. These mortgage fraud indictments will be hard for a criminal defense attorney to defend. Most juries will not have sympathy for mortgage brokers or lenders. The borrower will be extremely sympathetic to a jury. With the mortgage fraud indictment there may also be the conspiracy count, a possible RICO count, and a wire or mail fraud count depending on how the mortgage was completed. Recent over developed areas will be targets for federal investigations. Myrtle Beach, Charleston, Miami Beach, and Miami have suffered losses with recent real down cycles.
Criminal defense lawyers representing mortgage companies or lenders must be aware of possible forfeiture counts and defenses to fraud. The key witness to this case will be the borrower who is seeking to get out of a substantial debt. Many borrowers over extended during the real estate boom of the past 10 years. The legitimate mortgage broker or mortgage company may be the scapegoat to a troubled borrower. The mortgage broker decisions will be evaluated by what information is provided to banks and lenders. Any false statements on mortgage or loan documents that a broker or mortgage company was aware of or had a duty to investigate will form the basis for an investigation. Once major lenders begin complaining about false statements they were provided in the lending process, the mail or wire fraud indictment becomes a real possibility.
A Federal Court in Atlanta sentenced five defendants to federal prison for mortgage fraud in April of this year. One defendant was from Hilton Head, South Carolina. The indictment charged bank fraud, wire fraud, conspiracy and money laundering. The group used inflated mortgage loans to unqualified straw borrowers. These unqualified borrowers were paid hundreds of thousands of dollars for their participation in the fraud. The use of false qualifying information is key to these indictments. The lending information passed on to the lending company will be the star exhibit in the trial. This case is just the beginning of the United States Attorney aggressively prosecuting mortgage fraud cases. Just as when Enron cost the public millions of dollars, the more the real estate market hurts the country, the more indictments will be served. Mortgage fraud and wire fraud defenses can be presented by prior actions of the defendants in their lending process and the very hard defense of lack of knowledge. Federal case law provides for a deliberate ignorance instruction. This instruction allows the prosecutor to tell the jury that a defendant charged with fraud intentionally ignored facts that would have lead a normal person to question the information being provided. In other words a mortgage broker or company would need to almost polygraph the borrower on the information they provide on the loan. If the borrower comes in with fake documents, false tax returns and other documents to support the loan, the mortgage broker may still be held accountable. I have been the defense lawyer for individuals charged with fraud and know very well the difficulties with fighting the government on these charges